Value of Segregated or Split Portfolios of Shares

Topic: Finance
Words: 292 Pages: 1

When considering the issue of investing in financial instruments, the natural question of guaranteeing investments very often arises. Not only experienced investors but most beginners consider this moment to be decisive for making a decision. First, it is necessary to study the form’s flexibility inherent in companies with segregated or split portfolios of shares (SPC). Separating the assets of clients and the intermediary company into separate accounts or a segregated portfolio is one of the most appropriate tools in the modern world of corporate finance.

The SPC provides an opportunity to establish a statutory fence to protect against cross-liability issues related to the assets and liabilities of different SPs under the SPC. In the case of a split portfolio, clients place their money in independent custodian banks (Chen et al., 2021). Further, the investor himself decides in which assets to place his funds. According to the chosen strategy, money is transferred directly to the specified details. In other words, under any circumstances, the client’s money will be fully protected from illegal actions.

A company with split shares is not infrequently referred to as a protected cell company. First, the assets and liabilities of segregated portfolios are divided among themselves into several cells that are independent of each other. At the same time, each cell has limited liability (Chen et al., 2021). It allows portfolio-oriented risk management since the assets of individual segments are separated from each other and, most importantly, from the core. SPCs are generally most common in the insurance industry, non-profit sector, or investment management. In addition, small individual funds may operate separately in terms of liability and capital, although they are all managed by the same company. Thus, an organization with an SPC management has decisive advantages for funds.

Reference

Chen, Y., kumara, E. K., & Sivakumar, V. (2021). Investigation of finance industry on risk awareness model and digital economic growth. Annals of Operations Research.