Many clients of Atlas Capital come to us with concentrated positions in one or more investments. Often, these concentrated positions are the result of the client’s professional success as an executive or investor. Good investing typically involves diversifying one’s portfolio, but there frequently are constraints on a client’s ability to sell a concentrated position. The position may imbed large unrealized gains, which would lead to tax consequences if the position is sold. The client may be a CEO or senior executive at a corporation who has limitations on the ability to sell stock or exercise stock options. The position may not be liquid or salable at the present time. Or, the client may simply have conviction that the concentrated position remains a good investment, or is an investment where the client has particular comfort or knowledge.
Atlas Capital Advisors has extensive expertise with clients who have concentrated positions in their investment portfolios. While the concentrated position remains in the client portfolio, Atlas will build a portfolio for the remaining assets which complements the concentrated position. For instance, if the client were a senior executive at a technology company who has a large position in company stock, the remaining portfolio would be customized for the client to underweight or avoid positions that are highly correlated with the client’s company stock holdings.
We also work with clients to create more diversification, even without selling the position. For instance, the position may be hedged with options or futures in order to offset any future loss on the concentrated position. Alternatively, the concentrated position may be used as collateral for a loan which then is used to add diversifying positions to the portfolio.
Finally, we advise clients who wish to utilize the concentrated position to fund a private foundation and on estate planning related to the concentrated position.
The ultimate strategy is derived in close consultation with the client and naturally results from the specific client’s circumstances.