A segregated fund invests much like a mutual fund: your money goes into professionally managed funds of stocks, bonds or both, and its value rises and falls with markets. The difference is the wrapper. A segregated fund is an insurance contract, governed by insurance legislation rather than securities legislation, offered only by life insurance companies and sold only by licensed life insurance advisors.
That contract adds a maturity guarantee and a death benefit guarantee, and lets you name beneficiaries who are paid directly, outside your estate. The protection costs more: fees are usually higher than for a comparable mutual fund. Segregated funds can also allocate capital losses to you, which mutual funds can’t.