By: StepStone Insurance Solutions

Key takeaways

  • Traditional drawdown insurance dedicated funds (IDFs) create a deployment lag (the J-curve) inside private placement life insurance (PPLI), costing clients months or years of tax-advantaged compounding. 
  • Evergreen, open-ended IDFs invest premium dollars on day one through secondaries and co-investments, cutting cash drag and improving return on committed capital versus Internal Rate of Return (IRR)-focused drawdown funds. 
  • Evergreen structures fit PPLI’s long-duration needs: no fixed end date, weekly net asset value (NAV), no capital calls or Internal Revenue Service (IRS) Schedule K-1 tax forms (K-1s), and periodic liquidity windows. 
  • StepStone’s Balanced Private Markets Fund (SBAL) is a purpose-built, diversified four-asset-class evergreen IDF managed by StepStone Group in partnership with SALI Fund Services. 
  • Trade-offs remain: redemption gates can close, NAV is an estimate rather than a transaction price, IRS compliance is ongoing, and manager selection drives the dispersion of outcomes. 

Executive summary

Most private placement life insurance (PPLI) policies funded with private equity insurance dedicated funds (IDFs) face a practical challenge: capital may not be fully invested in private markets for several years. That delay can reduce the compounding benefit PPLI is designed to support.

For advisors and high-net-worth clients who already understand PPLI and IDFs, the strategic case for private markets inside a life insurance wrapper is well established. Tax-deferred compounding, income tax-free death benefits, asset protection, and access to institutional-quality investments can make PPLI a useful vehicle for long-term, multigenerational wealth planning.

Less discussed is how the structure of the IDF can affect that compounding. Most PPLI policies with private market exposure rely on traditional drawdown funds. This paper introduces a novel approach: evergreen IDFs, which we believe fit the PPLI structure far more effectively. StepStone’s Balanced Private Markets Fund (SBAL) is among the first purpose-built options designed specifically for this pairing.

The hidden cost of traditional IDF deployment 

In drawdown funds, managers typically call capital over two to five years. Until then, premium dollars may sit in money market funds or short-duration bonds, earning less than the private market return the client seeks. That early return drag is the well-known “J-curve.” Inside a PPLI policy, it carries an added cost: each month of cash drag is a month of potential tax-advantaged private market compounding the client does not capture. 

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