Hedge funds are under pressure in today’s market, and many are finding it challenging to raise money.
Many hedge funds focus on raising capital from family offices and wealthy individuals. For those that focus on HNW clients, private placement life insurance (PPLI) can offer advantages.
Peter Sasaki of CGS Financial Solutions, a leading private placement life insurance administrative platform, notes that the rich and the super-rich are increasingly looking at PPLI. As long as investment performance is taxed, PPLI combined with a successful hedge fund can offer enhanced results.
Single-family offices are investing in hedge funds, and many are willing to make significant investments with small and nimble hedge funds. A consortium of family offices could invest tens, or even hundreds, of millions of dollars. But simply wrapping a hedge fund in life insurance to create a PPLI policy doesn’t necessarily translate into new money. More often, hedge fund managers going onto a PPLI platform expect other professionals or institutions to market their PPLI policy. Unless hedge funds have workable business development plans, they won’t see more assets under management.
There are several approaches hedge fund managers can take to leverage PPLI policies to raise assets. For example, by bringing PPLI to current wealthy clients, hedge funds can use a proven process like asset capture to bring in more assets.
Creating strategic partnerships with financial advisors and wealth managers is also a useful strategy. The hedge fund’s PPLI policy is positioned attractively to high-net-worth clients and prospects referred by financial advisors and wealth managers. Attorneys and accountants are also conduits to high-net-worth clients, and there are substantial benefits to these professionals that can be highlighted in order to gain their cooperation.
Hedge fund managers who want to raise capital among the wealthy and ultra-wealthy might want to create their own PPLI policies. But unless there is a strong business development plan in place, the chances of raising significant assets are not high.
For more information, please read:
When Hedge Funds Should Avoid Private Placement Life Insurance | Forbes