$25M Tech Founder Case Study | Concentrated Equity to Institutional Diversification | February 2026
55.9%
VaR Reduced
+78.9%
Sharpe Improved
+455%
Income Growth
8 to 145
Holdings
This project was built end-to-end using Claude Code as the primary development and analysis tool across Python, Excel, and PowerPoint.
A technology founder reaches liquidity. Years of equity compensation and appreciation have produced a $25 million portfolio — but 90% of it sits in a single sector, generating almost no income and carrying a maximum drawdown risk that could erase nearly half the portfolio in a severe downturn. The question is not whether to diversify. The question is how to do it efficiently.
This case study walks through the full analytical framework applied to a real client scenario: quantifying the cost of inaction, designing a tax-efficient liquidation strategy, deploying securities-based lending to fund philanthropic goals, and building a goals-based projection model that spans 20 years.
The current portfolio holds two positions: 90% in U.S. large-cap technology equity and 10% in cash. On paper, the performance history looks strong. In structural terms, the portfolio is fragile.
| Metric | Current | Optimized |
|---|---|---|
| Asset Classes | 2 | 7 |
| Number of Holdings | 8 | 145 |
| Portfolio Beta | 1.35 | 0.88 |
| S&P 500 Correlation | 0.94 | 0.68 |
| Value at Risk (95%) | $4,250,000 | $1,875,000 |
| Maximum Drawdown | 45.0% | 22.0% |
| Concentration Risk Score | 95/100 | 15/100 |
| Sharpe Ratio | 0.38 | 0.68 |
| Annual Portfolio Income | $112,500 | $625,000 |
A portfolio beta of 1.35 means the portfolio amplifies every S&P 500 move by 35%. Combined with a 0.94 correlation to that same index, there is almost no diversification benefit; the portfolio behaves like a leveraged S&P 500 position. The 45% maximum drawdown figure means a repeat of 2000-2002 or 2008-2009 conditions could permanently impair more than $11 million in wealth.
The income problem compounds this. A $25 million portfolio generating $112,500 per year (a 0.45% yield) provides no meaningful cash flow buffer. The optimized model targets $625,000 annually, a 455% improvement.
The transition operates across three distinct phases, each with a defined objective.
Phase 1: Discovery and Planning (Months 1-3)
Establish the legal, tax, and investment foundation. This includes a risk tolerance assessment, a full cost basis audit, coordination with the client's CPA on tax exposure, and drafting an Investment Policy Statement that governs every subsequent decision.
Phase 2: Systematic Liquidation and Redeployment (Months 4-11)
Execute a five-tranche liquidation of the technology position at $4.5 million per month. Proceeds redeploy simultaneously into the target allocation across fixed income, public equity, private equity, and real estate.
Phase 3: SBL Facility, Foundation Funding, and Tax Harvesting (Months 12-18)
Establish a $5 million securities-based lending facility to seed the private foundation without additional liquidation. Execute the $850,000 tax-loss harvesting strategy identified during Phase 1 planning.
The portfolio carries $18,500,000 in unrealized capital gains against a $6,500,000 cost basis. At California tax rates (federal long-term capital gains at 20%, net investment income tax at 3.8%, and state income tax at 13.3%) the blended effective rate reaches 37.1%.
Gross Liability
$6.86M
Harvesting Offset
$850K
Net Liability
$6.01M
| Item | Amount |
|---|---|
| Unrealized Capital Gains | $18,500,000 |
| Blended Effective Tax Rate | 37.1% |
| Gross Tax Liability | $6,863,500 |
| Tax-Loss Harvesting Offset | ($850,000) |
| Net Tax Liability | $6,013,500 |
| Post-Tax Portfolio Value | $18,986,500 |
Five mitigation strategies reduce the effective tax drag:
Tax-Loss Harvesting: $850,000 in identified offsets reduces the net liability to $6,013,500.
Installment Liquidation: Spreading the five tranches across a December-to-January calendar year straddle allows a portion of gains to fall into the following tax year, deferring cash outflow.
Donor-Advised Fund (DAF): Contributing appreciated shares directly to a DAF eliminates capital gains on the contributed amount and generates an immediate charitable deduction.
Qualified Opportunity Zone (QOZ): Reinvesting eligible gains into a QOZ fund defers up to $1,000,000 in recognized gains and reduces the taxable basis on the QOZ investment over time.
Charitable Remainder Trust (CRT): A structural option that converts concentrated equity into a diversified income stream while deferring the tax event.
The optimized model expands from 2 asset classes to 7, from 8 holdings to 145, and from 1 geographic region to 4.
| Asset Class | Allocation | Dollar Value |
|---|---|---|
| Public Equity | 55% | $13,750,000 |
| U.S. Large Cap | 25% | $6,250,000 |
| International / EM | 17% | $4,250,000 |
| U.S. Mid & Small Cap | 13% | $3,250,000 |
| Fixed Income | 23% | $5,750,000 |
| Private Equity | 12% | $3,000,000 |
| Real Estate | 8% | $2,000,000 |
| Cash & Equivalents | 2% | $500,000 |
| Total | 100% | $25,000,000 |
The fixed income allocation (23%) generates stable income and dampens volatility. Private equity (12%) captures illiquidity premium over a longer horizon. Real estate (8%) adds inflation sensitivity and income diversification. The result: portfolio beta drops from 1.35 to 0.88, and Value at Risk falls 55.9%.
The client's goal is to establish a $10 million private foundation. The straightforward path — liquidating $5 million of tech stock — triggers an immediate tax cost of approximately $1,525,000, leaving only $3,475,000 in foundation capital. An alternative path uses a securities-based lending (SBL) facility.
Liquidate Path
$3.48M
to foundation after $1.53M tax
SBL Path
$5.00M
to foundation, zero tax event
| Item | Detail |
|---|---|
| Loan Amount | $5,000,000 |
| Collateral Pledged | $15,000,000 |
| Loan-to-Value at Origination | 33.3% |
| Margin Call Trigger | 40.0% LTV |
| Interest Rate | 6.50% (SOFR + 200 bps) |
| After-Tax Effective Rate | 4.10% |
| Annual Interest Cost | $325,000 gross / $204,750 net |
The SBL delivers $5,000,000 to the foundation immediately, with zero liquidation and zero tax event. The annual carrying cost of $204,750 is funded from the portfolio's $625,000 in annual income, requiring no asset sales.
| Factor | Liquidate | Use SBL |
|---|---|---|
| Immediate Tax Cost | $1,525,000 | $0 |
| Capital to Foundation | $3,475,000 | $5,000,000 |
| Portfolio Compounding Base | $20,000,000 | $25,000,000 |
| 10-Year Interest Cost | $0 | $2,047,500 |
| Net 10-Year SBL Advantage | -- | $7,124,500 |
The margin call stress test shows the facility remains safe through a 10% market decline (LTV rises to 37.0%) and triggers only at a 20% decline or worse (LTV reaches 41.7%).
Starting from the $18,986,500 post-tax portfolio, three scenarios model outcomes across a 20-year horizon. Each scenario nets out the 2.0% annual withdrawal rate.
| Year | Bear (3.0% net) | Base (7.8% net) | Bull (11.5% net) |
|---|---|---|---|
| Year 1 | $19,556,095 | $20,467,447 | $21,169,948 |
| Year 5 | $22,010,557 | $27,640,043 | $32,720,449 |
| Year 10 | $25,516,268 | $40,237,642 | $56,388,895 |
| Year 15 | $29,580,348 | $58,576,892 | $97,177,993 |
| Year 20 | $34,291,731 | $85,274,686 | $167,472,021 |
Even in the bear scenario, the portfolio grows from $18,986,500 to $34,291,731 over 20 years while sustaining withdrawals. The SBL facility is repaid from portfolio income by Year 10, requiring no asset sales.
Private Foundation Trajectory: The $5 million SBL seed, compounding at 2.5% net with $70,760 in annual directed contributions from portfolio income, reaches an estimated $7.2 million by Year 10 and $10.0 million by Year 20, achieving the foundation target without any additional capital commitment.
Risk Reduction
55.9%
decrease in VaR
Return Quality
+78.9%
Sharpe Ratio improvement
Income Growth
+455%
annual portfolio income
Tax Efficiency
$850K
harvesting offsets identified
Foundation
$5.0M
deployed via SBL, zero liquidation
20-Year Projection
$85.3M
base case (from $19.0M)
The transition converts a fragile, single-sector position into an institutional-grade portfolio that generates meaningful income, manages downside risk systematically, and funds a philanthropic legacy without sacrificing compounding capital.
For illustrative purposes only. All figures are estimates based on modeled assumptions. Past performance does not guarantee future results. Case Study | February 2026.