Navigating Concentrated Wealth and Exchange Funds

In this episode of Excess Returns, we dive deep into one of the most complex and pressing issues facing successful investors today: what to do with concentrated stock positions. Whether from employee stock compensation or a major investment win, holding too much of a single stock presents serious tax and diversification challenges. Our guests—Wes Gray of Alpha Architect, Sri Narayan of Cache Financial, and guest host Dave Nadig—break down the innovative solutions that are changing the game. From exchange funds to Section 351 conversions, this is a masterclass in modern wealth and risk management.

Topics Covered:

The problem with concentrated stock positions and why it’s getting worse

How stock-based compensation fuels investor overexposure

Why traditional exchange funds fall short—and how Cache is solving it

Understanding Section 351 ETF conversions and tax-deferred diversification

The mechanics behind Cache's NASDAQ 100 and S&P 500 strategies

How exchange funds work: structure, lockups, and liquidity

Using ETFs to rebalance and solve diversification constraints

Real estate allocations and the 20% illiquid asset requirement

Costs, fees, and transparency of the modern exchange fund model

Regulatory and legal perspectives behind the structure

Practical advice for advisors and investors with low-basis positions

How to access, evaluate, and engage with Cache and Alpha Architect solutions