Using an exchange fund to solve a concentrated stock position
Izzy
Founder and CEO
When one stock makes up an outsized share of your net worth, that's a concentrated position, full stop.
Years of vesting, an early bet that paid off, or a family holding nobody ever sold: any of these can quietly become the single biggest risk in a portfolio. Whatever happens to that one company, whether it's poor performance, scandal, or plain market volatility, lands directly on your personal finances.
The fix is diversification. The question is how to get there without triggering a tax bill along the way.
Why the standard fix costs so much
Sell part of the position, reinvest the proceeds somewhere diversified: that's the conventional advice, and it's sound in theory. In practice, selling triggers capital gains tax on the full appreciation, due the same tax year as the sale. Modest gains, modest tax bill, no big deal. Substantial unrealized gains, and the bill gets enormous fast.
Take a director of engineering sitting on vested shares from a company that's since gone public. Shares tripled since vesting, and she sells $500,000 worth to diversify: that alone could mean owing more than $50,000 in federal long-term capital gains tax, before state tax adds to the total. That's capital that stops compounding the second it leaves her portfolio for the IRS.
This is exactly the trade-off keeping concentrated positions concentrated in the first place. Sell and diversify, and hand over a large slice of the gain to do it. Or hold, stay exposed to one company's fortunes, and keep putting the decision off.
Can an exchange fund actually solve this?
An exchange fund swaps concentrated shares for a diversified portfolio, without a taxable sale event (the capital gains tax a sale would trigger simply gets deferred), in return for a multi-year holding period, commonly seven years.
Section 721 is what makes this possible: because the IRS treats the move as an exchange rather than a sale, no capital gains tax comes due on contribution. The original cost basis carries forward rather than disappearing, so the eventual tax bill still exists. It arrives if and when the now-diversified portfolio gets sold.
Diversification happens the moment shares join the fund. What's given up in exchange is day-to-day access to that capital until the holding period runs out.
Ready to address a concentrated portfolio without the tax bill that comes with selling? Check eligibility for Glidepath.
Choosing between exchange fund providers
Finding a provider that actually fits your situation takes some digging: structure and eligibility vary enough between funds that a clean side-by-side comparison isn't always straightforward. A few questions worth asking any provider directly:
| What to check | Why it matters |
|---|---|
| Minimum investment | Historically $500K–$1M, though a handful of newer funds have pushed this down to as little as $100K. |
| Eligibility standard | Some funds require Qualified Purchaser status ($5M+ in investable assets); others accept accredited investors (net worth of $1M, or $200K/$300K in annual income depending on individual vs. spousal entry). |
| Qualifying illiquid asset | 20% of assets must sit in a qualifying illiquid asset, commonly real estate. What that asset actually is shapes the fund's return profile and costs. |
| Management fee | Usually an annual charge against assets under management, and one that compounds against you for as long as capital stays locked up. |
Where Glidepath differs
A $100K minimum puts Glidepath well under the traditional range, paired with accredited investor eligibility rather than the older Qualified Purchaser bar. No management fee applies to members either, which matters over a seven-plus year hold: a 1% annual fee on a $500,000 position alone adds up to tens of thousands of dollars across that stretch.
If a concentrated stock position is the thing keeping you up at night, Glidepath is worth a conversation. Get started to see if you're eligible to join.