Managing Over-Exposure to a Single Stock or Scheme: A Playbook for UHNIs & Family Offices

Many ultra-high-net-worth individuals (UHNIs) and family offices naturally accumulate large positions in a single company stock, private holding, or preferred fund. This often happens through ESOPs, founder legacies, inheritance, or past investment success.

Such concentration often creates wealth-but it can also endanger it. When one company or sector faces turbulence, the impact on family portfolios can be disproportionate.

Active Investing vs. Passive Concentration

Active managers may take concentrated bets, but they do so within a disciplined framework with defined position limits, liquidity analysis, hedging, and continuous monitoring.

Family portfolios, however, often become concentrated passively – an ESOP that grows over time or a legacy stock that’s never trimmed. These positions lack formal oversight, and over the years, liquidity needs, tax implications, or estate considerations rarely get revisited.

When a single-company shock hits, paper wealth can evaporate quickly. Families may face liquidity stress, tax complications, or forced selling, precisely when stability is most needed.

Why Concentration Happens

• ESOPs: Executives defer selling for tax or loyalty reasons, leading to structural concentration.
• Legacy or Founder Holdings: Emotional or symbolic attachment prevents diversification.
• Anchoring to Past Performance: “This stock made us rich – it will continue to.”
• Private Allocations: Unchecked direct stakes in known founders or ventures can tilt portfolio balance.

The Ripple Effect of a Single-Name Shock

Even modest concentration can have an outsized effect:

Beyond the numbers:

• Liquidity stress: Large blocks are hard to exit without affecting market prices.
• Behavioural traps: Emotional attachment delays action, amplifying losses.

Case Studies

Nvidia: The AI-led surge made many employees paper millionaires via RSUs. Yet, high concentration means any correction could significantly erode wealth.

Uber (2019): Employee lockups led to forced timing mismatches, with some selling far below IPO highs.

Swiggy (2025): The company granted ~₹600 crore worth of ESOPs amid growing losses, highlighting both the potential and the risk of stock-linked compensation in volatile sectors.

Practical Mitigation: A Family Office Toolkit

1. Governance & Process

• Set a concentration policy e.g., cap any single position at X% of investible assets.
• Conduct quarterly concentration reviews using a “top 10 positions” dashboard.
• Run pre-trade checks before large sells, modelling liquidity and tax outcomes.

1. Execution Tools

• Systematic trimming: Sell a fixed percentage quarterly until within policy limits.
• Hedging: Use options or derivatives for temporary downside protection.
• Tax-aware selling: Spread sales across tax years or use efficient structures like trusts.

1. Behavioural & Family Alignment

• Conduct scenario planning to show the family “what if” outcomes.
• Align succession planning with concentration and liquidity strategy.
• Where holdings are strategic, define explicit reasons, horizons, and contingency plans.

Final Word

Perfect logic rarely beats good process. Families may never find the “ideal moment” to sell a beloved stock, but a disciplined framework can prevent emotional or delayed decisions that cost generations of wealth.

A well-documented policy, periodic reviews, and pre-agreed trimming mechanisms go a long way in reducing family friction, improving governance, and protecting capital through market cycles.