Wrapping Hedge Fund & Credit Allocations in PPLI for Maximum Efficiency
For Michael, managing hedge funds and credit strategies came with a price: a crushing 40% tax rate that eroded returns year after year. The solution wasn’t changing his investments—it was changing where he held them. By wrapping his portfolio inside a PPLI contract, Michael found a way to let his capital grow tax-free, unlock retirement income later, and still deliver a lasting benefit for his family.
Andrew Perez
September 17, 2025
Client profile
Age
49
Occupation
Family Office CIO
Marital Status
Married, two children
Net Worth
$40M
Challenge
Michael managed a portfolio heavily weighted toward hedge funds and alternative credit strategies — both generating high ordinary income and short-term capital gains. His effective tax rate exceeded 40%, which was significantly reducing after-tax returns.
Solution
- Structure: Individually owned PPLI contract
- Premium: $8M single premium
- Death Benefit:Minimum corridor death benefit (approx. $9M)
- Investments: Hedge fund and private credit allocations inside the PPLI segregated account
Why It Worked
- Eliminates annual tax drag on highly taxed strategies
- Allows reallocation between managers without realizing gains
- Creates a large, income-tax-free death benefit as a secondary benefit
- Offers access to cash value later for tax-free retirement distributions
Outcome
After 20 years, Michael’s policy is projected to grow to $18M, entirely tax-free. Beginning at age 70, he can take $600,000 per year in tax-free policy loans for retirement, while maintaining a multi-million-dollar death benefit for his heirs.