Getting a Manager Onto a Carrier’s Platform

The request comes up in years three to ten of almost every relationship, and it arrives sounding simple. The family has a manager they have used for a long time, or a new one they want to allocate to, and they want that manager to run part of the policy's assets. Sometimes it is the first question asked in the first meeting, before anything about cost or structure.

The answer splits in two, and the split is the whole subject. Moving between strategies already on the carrier's platform is an allocation instruction and takes days. Getting a new manager onto the platform is a project measured in months, occasionally not achievable at all, and the obstacles are not the ones people expect. This article sets out what actually has to be built, which parts are law and which are commerce, and where the real decision points sit. It sits under our page on investment flexibility.

Tax law is not the obstacle, and says so in one sentence

Start by clearing away the assumption that the Internal Revenue Code objects to a family's own manager. It does not. Section 817(h)(5), headed "Independent investment advisors," reads in full: "Nothing in this subsection shall be construed as prohibiting the use of independent investment advisors."

Be careful about what that provision does, because it is regularly over-claimed. It sits inside section 817(h), which is the diversification subsection. It confirms that using an independent adviser does not itself defeat diversification. It is not a safe harbour against the investor control doctrine, which is judicial and administrative rather than statutory and which is analysed separately in our research on investor control.

So the family may have a professional manager. What it may not have is a manager taking instructions from it, and what the policy may not hold is an interest anybody else can buy.

The condition that stops the obvious solution

The obvious solution is for the separate account simply to invest in the manager's existing fund. That is precisely what cannot happen, and the reason is a single condition in the look-through rule.

Treasury Regulation section 1.817-5(f)(1) provides that where the paragraph applies, a beneficial interest in a regulated investment company, real estate investment trust, partnership or grantor trust "shall not be treated as a single investment of a segregated asset account. Instead, a pro rata portion of each asset of the investment company, partnership, or trust shall be treated, for purposes of this section, as an asset of the segregated asset account."

That look-through is what makes a diversified fund work inside a policy rather than counting as one 100 per cent position. It applies only where both conditions in section 1.817-5(f)(2)(i) are met:

"(A) All the beneficial interests in the investment company, partnership, or trust (other than those described in paragraph (f)(3) of this section) are held by one or more segregated asset accounts of one or more insurance companies; and (B) Public access to such investment company, partnership, or trust is available exclusively (except as otherwise permitted in paragraph (f)(3) of this section) through the purchase of a variable contract."

Condition (B) is the one that ends the conversation about the flagship fund. And "public access" here does not mean what most people assume. Revenue Ruling 2003-92 makes that unmistakable. In its Situations 1 and 2, partnership interests were "sold in private placement offerings and are sold only to qualified purchasers that are accredited investors or to no more than one hundred accredited investors." That is a private placement to sophisticated investors, and it still counted as availability outside the wrapper. The holding: the contract holder is treated as the owner of the partnership interests and must include the income currently under section 61(a). Only in Situation 3, where interests were "available for purchase only by a purchaser of an Annuity, a LIC, or other variable contracts from insurance companies," was the insurance company treated as the owner.

Say that plainly, because it is counter-intuitive and it is where families lose weeks. A hedge fund open only to qualified purchasers by private placement is publicly available for this purpose. The manager's existing fund cannot be used. Something new has to be built.

What may be built, and who else may hold a piece of it

What gets built is a vehicle whose interests are held exclusively by insurance company separate accounts. Section 1.817-5(f)(3) then permits seven categories of holder without breaking condition (A), and two of them are the practical ones.

Paragraph (f)(3)(i) permits interests held by the general account of a life insurance company or a related corporation under section 267(b), "but only if the return on such interests is computed in the same manner as the return on an interest held by a segregated asset account is computed (determined without regard to expenses attributable to variable contracts), there is no intent to sell such interests to the public, and a segregated asset account of such life insurance company also holds or will hold a beneficial interest in the investment company, partnership, or trust." Note that third limb, which is often omitted: the insurer's own separate account must also hold or come to hold an interest. Seed money alone does not qualify.

Paragraph (f)(3)(ii) permits interests held by the manager, or a corporation related to it under section 267(b), "but only if the holding of the interests is in connection with the creation or management of the investment company, partnership, or trust, the return on such interest is computed in the same manner as the return on an interest held by a segregated asset account is computed, and there is no intent to sell such interests to the public."

The boundary in (f)(3)(ii) is the one that makes an insurance dedicated fund what it is. It permits the manager to hold seed. It does not permit the manager's clients, its principals in their personal capacities, or any outside investor. A manager who proposes to run the vehicle alongside a few friendly family offices has not understood the condition, and that proposal cannot be fixed by documentation.

The remaining exceptions cover trustees of qualified pension or retirement plans, section 529 qualified tuition programs, trustees of non-United States pension plans primarily for nonresident aliens, Puerto Rican segregated accounts, and a legacy grandfather tied to Revenue Ruling 81-225 and pre-September 1981 premiums. None of them is a live planning route for a family in this market.

The securities law layer, and one citation that keeps being wrong

Having satisfied the tax conditions, the vehicle has to avoid registration as an investment company. Two exclusions do the work.

Section 3(c)(1) of the Investment Company Act excludes "any issuer whose outstanding securities (other than short-term paper) are beneficially owned by not more than one hundred persons (or, in the case of a qualifying venture capital fund, 250 persons) and which is not making and does not presently propose to make a public offering of its securities." One number in that provision has moved: the qualifying venture capital fund threshold, which the statute indexes, now stands at 12,000,000 dollars under 17 CFR 270.3c-7, applicable until 1 November 2029. Material still quoting 10,000,000 dollars is out of date.

Section 3(c)(7)(A) excludes "any issuer, the outstanding securities of which are owned exclusively by persons who, at the time of acquisition of such securities, are qualified purchasers, and which is not making and does not at that time propose to make a public offering of such securities." A qualified purchaser under section 2(a)(51)(A) includes a natural person owning not less than 5,000,000 dollars in investments, and a person investing on a discretionary basis for its own or others' accounts owning not less than 25,000,000 dollars. Neither of those figures is inflation indexed, unlike the venture capital number.

For a vehicle expecting to grow, 3(c)(7) is the more usable of the two because it carries no owner count cap.

One correction worth making because it appears in a good deal of otherwise careful marketing material. Section 3(c)(11) is not the answer for a private placement separate account. Its separate account limb applies only where assets are "derived solely from" contributions under qualified retirement plans meeting section 401 of the Code, contributions under governmental plans exempt under section 3(a)(2) of the Securities Act, and insurer advances in connection with operating the account. An individually owned policy cannot satisfy it. Similarly, the insurance exemption in the Securities Act is section 3(a)(8), not section 3(a)(2), and under SEC v. Variable Annuity Life Insurance Co., 359 U.S. 65 (1959), variable contracts that place the investment risk on the holder fall outside it and are securities.

We should be honest about one thing here. The statutory text supporting each step above is verified, but we did not find an SEC release or no-action letter expressly applying 3(c)(1) or 3(c)(7) to a private placement life separate account. It is the accepted structuring approach and it rests on the statute; it is not a position the Commission has blessed in terms.

The manager's own regulatory position

Whether the manager has to register as an investment adviser depends on exemptions rather than on anything specific to insurance.

Section 203(m) of the Advisers Act exempts an adviser that acts solely as adviser to private funds with less than 150,000,000 dollars of assets under management in the United States, and an insurance dedicated fund relying on 3(c)(1) or 3(c)(7) is a private fund by definition under section 202(a)(29). A non-United States manager may look to the foreign private adviser exemption at section 202(a)(30) and section 203(b)(3), which requires no place of business in the United States, fewer than fifteen United States clients and investors in private funds, and aggregate United States attributable assets under management below 25,000,000 dollars.

There is one exemption worth flagging that practitioners often overlook. Section 203(b)(2) exempts an adviser "whose only clients are insurance companies." Whether an insurance dedicated fund manager fits depends on how the client is characterised, whether as the insurer, the separate account or the fund, and we found no authority applying it to this fact pattern. Do not assume it is available.

And a reliance point that gets missed: an adviser relying on section 203(l) or 203(m) becomes an exempt reporting adviser, which is not a filing holiday. Rule 204-4(a) requires such an adviser to complete and file reports on Form ADV. State registration may apply regardless.

Where the fund itself is formed

Cayman is the usual answer for an offshore vehicle, and the position there changed six years ago in a way a surprising amount of material has not caught up with.

The exemption that used to let a fund with fifteen or fewer investors stay outside the regime is gone. The Mutual Funds (Amendment) Law 2020 abolished it, and what were formerly section 4(4) funds are now limited investor funds that must register with the Cayman Islands Monetary Authority. Under the Mutual Funds Act as now in force, the small investor route requires the equity interests to be held by not more than fifteen investors, a majority of whom can appoint or remove the operator, and additionally requires filings with the Authority, registration in the prescribed manner and payment of the prescribed annual fee. Registered funds also carry annual audit obligations.

The alternative route requires a minimum aggregate equity interest purchasable of 80,000 Cayman dollars, roughly 100,000 United States dollars, or listing on a specified exchange, or master fund status, again with filings, registration and the annual fee.

Closed ended vehicles fall under the Private Funds Act instead, which also requires registration and under which a single investor exemption exists where the fund has only one investor of record and the constitutive documents say so. Most insurance dedicated funds are open ended and therefore sit under the Mutual Funds Act, where we did not find an equivalent blanket single investor exemption. Anything telling a family that a small Cayman fund avoids regulation is describing the world before 2020.

And now the part with no law in it at all

Here is the finding that matters most, and it is a negative one.

There is no authority setting a minimum size for an insurance dedicated fund. Section 817(h), Treasury Regulation section 1.817-5, Revenue Rulings 2003-91 and 2003-92 contain no capitalisation or minimum asset threshold of any kind. The regulation imposes diversification percentages, not size.

There is no authority prescribing how a carrier vets, approves or onboards a manager. No statute, no regulation, no revenue ruling, no SEC rule and no no-action letter addresses it. Track record, assets under management, operational infrastructure, audited financials, the identity of the administrator and auditor, minimum commitment levels and fee terms are all contractual and commercial, set by the carrier's own risk appetite and by whether the economics of the platform justify the work.

Every source quoting a specific figure, and the numbers that circulate cluster around fifty to a hundred million dollars of fund assets, traces back to advisory and law firm marketing rather than to primary authority. We are not going to repeat a number we cannot source. What we will say is that a manager will not stand up a dedicated vehicle for an allocation that does not carry its own operating costs, that those costs include an administrator, an auditor, a custodian, legal formation and ongoing regulatory filings, and that the threshold is therefore a function of the specific vehicle's expense base rather than a rule of thumb.

The single client account, and the shadow over it

Some carriers will accommodate a dedicated managed account for one policyholder rather than a pooled vehicle. That is the most flexible arrangement available and it deserves one paragraph of caution.

Senate Bill 4279, introduced in the 119th Congress on 13 April 2026, would add a new section 7702C and treat a contract as an applicable private placement contract unless the assets in the account support at least twenty-five private placement contracts, held on a fully pro rata basis, with contracts held by the same person aggregated as one. Holders of an applicable private placement contract would be treated as owning their share of the account assets. The bill has not been enacted and may never be. But it is aimed squarely at the single policyholder account, which makes the choice between a bespoke account and an allocation across established vehicles a live design decision rather than a purely operational one. We set out the mechanics of the bill on the investment flexibility page.

What the process actually looks like

Six things have to happen, roughly in this order, and none of them is fast.

The carrier decides in principle whether it will consider the manager at all, which is a commercial conversation and the point at which most requests quietly end.

The carrier completes operational and credit diligence on the manager, the administrator and the custodian. This is the carrier protecting its own regulatory position and it is not negotiable.

The vehicle is formed in its jurisdiction, registered where registration is required, and its documents are drafted so that interests can be held only by insurance company separate accounts and permitted seed under section 1.817-5(f)(3).

Service providers are appointed and their agreements negotiated. The administrator's ability to produce a defensible quarter end valuation is worth more attention than it usually gets, for reasons set out in our article on valuing illiquid assets.

The manager accepts a discretionary mandate that it will exercise without reference to the policyholder, and the family accepts that it cannot discuss specific holdings with anyone running the money. Revenue Ruling 2003-91 describes the boundary the Service approved: the holder may not "select or direct a particular investment," may not "sell, purchase, or exchange assets," and may not "communicate directly or indirectly with any investment officer of IC or its affiliates or with Advisor regarding the selection, quality, or rate of return of any specific investment or group of investments held in a Sub-account."

The carrier adds the vehicle to its platform and the allocation is made.

Our experience is that this runs in months rather than weeks, and a family that signed a subscription agreement elsewhere in nine days finds that very hard to accept. The right time to test a carrier on it is before signing, not in year eight. Carriers differ more on this question than on anything else in a proposal: some run genuinely broad platforms, some will build, and some will say they will build and then discover an internal policy in month four. It is the question we press hardest during carrier due diligence, because it determines what the structure can actually do a decade from now.

Frequently asked questions

Can I use my own investment manager inside a PPLI policy?

Often yes, as a project rather than an instruction. Section 817(h)(5) provides that nothing in the diversification subsection prohibits the use of independent investment advisers, so tax law is not the obstacle. The obstacle is that the vehicle must satisfy the look-through conditions at Treas. Reg. section 1.817-5(f)(2)(i), which require all beneficial interests to be held by insurance company segregated accounts and public access to be available exclusively through the purchase of a variable contract. A new vehicle therefore has to be created and approved by the carrier.

Why can the policy not simply invest in the manager's existing fund?

Because that fund is available outside the insurance wrapper. Revenue Ruling 2003-92 treated partnership interests sold in private placements to qualified purchasers and accredited investors as publicly available for this purpose, with the result that the contract holder rather than the insurance company was the owner of the interests and had to include the income currently. Only where interests are obtainable exclusively through a variable contract does the look-through survive.

Who may hold interests in an insurance dedicated fund apart from separate accounts?

Treas. Reg. section 1.817-5(f)(3) lists seven categories. The practical ones are the general account of a life insurance company or a related corporation, subject to matching return computation, no intent to sell to the public, and the requirement that a separate account of that insurer also holds or will hold an interest; and the manager or a related corporation, in connection with the creation or management of the vehicle, on the same return computation and no public sale conditions. The manager's clients and its principals in a personal capacity are not permitted.

Is there a minimum size for an insurance dedicated fund?

Not in law. Neither section 817(h) nor Treas. Reg. section 1.817-5 nor the revenue rulings contain any capitalisation or minimum asset threshold. The regulation imposes concentration limits, not size requirements. Every specific figure in circulation comes from advisory or law firm marketing material rather than primary authority. What is real is that a dedicated vehicle carries an administrator, auditor, custodian, formation costs and ongoing filings, so the practical threshold is whatever the vehicle's own expense base demands.

Does the manager have to be a registered investment adviser?

It depends on the exemptions. Section 203(m) of the Advisers Act exempts an adviser acting solely as adviser to private funds with under 150,000,000 dollars of United States assets under management, and an insurance dedicated fund relying on section 3(c)(1) or 3(c)(7) is a private fund under section 202(a)(29). Non-United States managers may look to the foreign private adviser exemption. Section 203(b)(2), for advisers whose only clients are insurance companies, may be relevant but we found no authority applying it to this fact pattern. An adviser relying on section 203(m) is an exempt reporting adviser and must still file Form ADV under Rule 204-4.

Has the Cayman position changed?

Yes, in 2020. The Mutual Funds (Amendment) Law 2020 abolished the old exemption for funds with fifteen or fewer investors. Those vehicles are now limited investor funds and must register with the Cayman Islands Monetary Authority, file the prescribed information, pay the annual fee and meet audit obligations. Closed ended vehicles fall under the Private Funds Act, which also requires registration. Material describing a small Cayman fund as unregulated is describing the pre-2020 regime.

How long does it take to add a manager?

Months rather than weeks, in our experience. The sequence runs through the carrier's in principle decision, operational and credit diligence on the manager and its service providers, formation and registration of the vehicle, negotiation of service agreements, acceptance of a discretionary mandate, and platform onboarding. No statute or regulation prescribes any of it, so timing is set entirely by the carrier and the manager.

What can the family discuss with the manager once it is running?

Considerably less than most expect. Revenue Ruling 2003-91 describes an arrangement the Service approved in which the holder could not select or direct a particular investment, could not sell, purchase or exchange assets, and could not communicate directly or indirectly with any investment officer or with the adviser regarding the selection, quality or rate of return of any specific investment. Allocation between strategies is permitted. Conversation about holdings is not.

Sources and authorities

Internal Revenue Code section 817(h)(5). Treasury Regulation section 1.817-5(f)(1), (f)(2)(i)(A) and (B), and (f)(3)(i) to (vii). Revenue Ruling 2003-91 and Revenue Ruling 2003-92, with Webber v. Commissioner, 144 T.C. 324 (2015). Investment Company Act of 1940 sections 2(a)(37), 2(a)(51)(A), 3(c)(1), 3(c)(7) and 3(c)(11), with 17 CFR 270.3c-7 for the current qualifying venture capital fund threshold and 17 CFR 270.6e-2 on variable life separate accounts. Securities Act of 1933 section 3(a)(8), with SEC v. Variable Annuity Life Insurance Co., 359 U.S. 65 (1959). Investment Advisers Act sections 202(a)(29), 202(a)(30), 203(b)(2), 203(b)(3) and 203(m), with Rules 203(m)-1 and 204-4. Cayman Islands Mutual Funds Act as currently revised and the Private Funds Act, with Cayman Islands Monetary Authority guidance on the 2020 amendments. Senate Bill 4279, 119th Congress, introduced 13 April 2026, which has not been enacted.

Our editorial standards explain how articles like this one are sourced and reviewed.

This article is educational only and does not constitute legal, tax, investment, or insurance advice. Fund formation, securities regulation and carrier practice differ by jurisdiction and by institution, several of the points here rest on statutory text rather than on regulator guidance, and the treatment of any particular arrangement depends on its own facts. Engage qualified advisers in every relevant jurisdiction before acting.