A Framework for Managing Concentrated Wealth

This article discusses the financial management of large, concentrated positions controlled by individuals and families with a multi-generational wealth management perspective. Most concentrated positions are in private companies, not public ones. Concentrated positions of this type have many benefits that may justify retaining them for decades, even generations, including the potential financial return of such an asset relative to a diversified portfolio, as well as the estate planning, tax management, and psychological benefits of owning that position. The article offers a framework for thinking through the benefits and risks of owning or selling concentrated positions, as well as some options for achieving risk diversification without selling. Skillfully managed, the complex interactions of concentrated positions, estate planning, tax planning, cash flow planning, governance, and family dynamics, can create tremendous value that is not captured with standard performance metrics.