Introduction: The UHNW Investment Imperative
When managing $10 million, $30 million, or more, your investment approach changes. UHNW investing requires specialized tools and techniques, offering approaches unavailable to most investors.
For families with under $10 million in assets, a portfolio of index funds, bonds, and real estate usually suffices. But if you and your family are in UHNW territory ($20 to $30 million or more), you’re not just optimizing returns but also creating multi-generational wealth, maximizing tax efficiency, accessing unique opportunities, and protecting against exceptional risks.
The Problem with the 60/40 Portfolio
A traditional 60/40 stock-bond portfolio works well for many investors. It’s like a reliable Toyota Corolla—efficient and dependable. But when managing $20 million plus, different challenges arise that traditional portfolios may not address.
With $30 million, a 60% allocation to stocks exposes $18 million to market swings. A 20% drop means a $3.6 million loss—troublesome if you need liquidity.
Tax efficiency requires sophistication. At this level, you’re likely in the top federal tax bracket (currently 37%) plus state and 3.8% net investment income tax—potentially over 50% in high-tax states. Traditional portfolios generate dividends, interest, and gains, resulting in large annual tax bills.
Accessing top opportunities requires different structures. The best real estate, private equity, and venture capital deals often require minimums of $500,000 to $10 million and multi-year lockups. Traditional portfolios can’t accommodate this.
Liability protection is critical. With visible wealth, you become a target for lawsuits. Your investment structure must offer asset protection, not just returns.
The Rise of Alternatives
Often, over half of UHNW portfolios are in alternatives. This isn’t just diversification; significant capital opens access to non-traditional markets. When public markets drop, alternatives help maintain stability.
According to The Ultra-High Net Worth Private Equity Investing Report 2023 by Campden Wealth and Titanbay, 84% of UHNW investors globally hold private equity, mainly to enhance long-term returns. Some hold up to 50% of net worth in alternative assets—from private equity to art and precious metals.
This guide is designed for UHNW families seeking to evaluate and enhance their investment strategies, structures, and opportunities. It explains why various options may or may not make sense for UHNW investors in your position. You’ll gain clarity on what strategies best match your priorities and challenges. Use this playbook to reassess your approach and take the next step: review your portfolio using these advanced strategies, and proactively discuss implementation with your advisors to ensure your goals are met.
in this guide
Part 1: Core Alternative Assets – The Institutional Toolkit
Private Equity and Venture Capital
Private equity means investing directly in companies that don’t trade on public stock exchanges. Instead of buying shares of stock through your brokerage account, you might invest $2 million in a private equity fund that buys and improves 8-10 manufacturing companies over a decade.
How it works: Private equity funds typically require $250,000 to $10 million minimum investments and lock up your capital for 7-12 years. During this period, the fund’s managers buy companies, work to improve their operations and profitability, then sell them. You receive distributions as companies are sold, with the bulk of returns typically coming in years 5-10.
Venture capital focuses on earlier-stage companies with high growth potential, the next potential Google, Uber, or Moderna. You’re backing entrepreneurs building innovative businesses, hoping that one or two massive successes will more than compensate for the many that fail.
Venture capital is like producing Broadway shows—most lose money, some break even, and a few rare hits can return your entire investment many times over. Venture capitalists expect many failures, a few modest returns, and occasional substantial successes.
In 2011, Sequoia Capital invested $8 million in a then relatively unknown messaging app called WhatsApp. When Facebook acquired it for $22 billion, Sequoia’s $60 million investment suddenly became worth over $3 billion, a 50x return. Of course, Sequoia Capital took an enormous risk, but their risk paid off better than their wildest dreams.
Co-Investments and Direct Deals
Here’s where UHNW investors really differentiate themselves. Rather than simply investing in funds, many UHNW families pursue co-investments, investing directly alongside a private equity or venture capital fund in a specific deal. This approach offers reduced fees (co-investments typically carry no management fees and lower carried interest), more control over specific deals, and stronger relationships with top fund managers.
Why UHNW families use private equity and venture capital: Private equity has historically provided returns of 10-15% annually over the long term, outpacing public stock markets by 2-4 percentage points. More importantly, these returns aren’t correlated day to day with the stock market. When the S&P 500 drops 15%, your private equity investments continue to operate businesses, make products, serve customers, and generate cash flow.
Top venture capital funds have generated extraordinary returns, 15-25% annually over decades. Beyond returns, venture capital provides exposure to innovation and transformational technologies before they become available publicly.
The trade-offs: You’re giving up liquidity completely during the lock-up period. If you invest $5 million in a private equity fund in 2025, you probably can’t access that capital until 2032 or later. You’re also paying high fees, typically 2% of assets annually plus 20% of profits. And performance varies dramatically between the best and worst funds.
Typical allocation: UHNW families often allocate 15-30% to private equity and 5-15% to venture capital.
Private Real Assets: Beyond REITs
Beyond owning their home or a few rental properties, UHNW families often invest in institutional-quality real estate through private funds or by directly owning commercial properties.
How it works: Private real estate funds pool capital to acquire apartment buildings, office towers, industrial warehouses, retail centers, or specialized properties like data centers and cell towers. Minimum investments typically range from $100,000 to $5 million, with terms of 5-10 years.
Real estate is like a goose that lays golden eggs—the property ideally appreciates over time, and rental income offers ongoing cash flow. Tax advantages like depreciation help shelter some of that income from taxes.
Core vs. Value-Add vs. Opportunistic
Core real estate involves high-quality properties in prime locations with strong tenants and stable cash flows. These properties generate steady income (maybe 5-7% annually) with modest appreciation potential.
Value-add properties need some improvement, perhaps renovation, re-tenanting, or better management. You’re taking more risk but aiming for higher returns (10-15% annually).
Opportunistic investments involve the highest risk and potential returns, including ground-up development, major repositioning, and distressed properties, with annual returns targeting 15%-20%+.
Tax Optimization Through Sophisticated Structures
Real estate provides significant tax benefits through depreciation deductions. Even better, UHNW investors can leverage advanced strategies:
1031 exchanges allow you to defer capital gains taxes indefinitely by selling one property and reinvesting the proceeds into another “like-kind” property. You can essentially trade up from smaller properties to larger institutional assets over time, deferring taxes until death.
Opportunity Zones offer powerful tax benefits for capital gains invested in designated economically distressed communities. The One Big Beautiful Bill Act of 2025 made this program permanent with enhanced benefits for investments made after January 1, 2027.
Investors can defer capital gains taxes for 5 years, receive a 10% basis step-up at year 5 (30% for rural zones), and pay no taxes on appreciation if the investment is held for 10 years. For example, if you invest a $5 million capital gain in an Opportunity Zone and it doubles in value, you could potentially create $4 million in tax-free wealth. This allows you to maximize your after-tax returns and build wealth more efficiently.
The trade-offs: Real estate is illiquid—selling typically takes 6-12 months. Properties require active management. And leverage amplifies both gains and losses.
Typical allocation: UHNW families often hold 15-25% in private real estate.
Private Credit and Hedge Funds
Private credit means making loans directly to businesses, bypassing traditional bank lending. You become the bank, earning interest income typically ranging from 8% to 14% annually.
How it works: Private credit funds pool capital to make loans to middle-market companies that need financing for growth, acquisitions, or refinancing. These loans are often “senior secured,” meaning you have first claim on the company assets if the business struggles.
Imagine a business owner needs $20 million to acquire a competitor. Traditional banks might only lend $12 million. You step in with the additional $8 million, earning 10-12% annual interest secured by company assets and personally guaranteed by the owner. The business gets funding banks won’t provide, and you earn returns well above bonds while accepting moderate risk.
Hedge funds employ complex trading strategies that can profit in both rising and falling markets. Unlike traditional mutual funds that generally buy stocks and hope they go up, hedge funds might simultaneously buy undervalued securities and sell short overvalued ones, trade on macroeconomic trends, or use complex derivatives strategies.
Imagine a master chess player who doesn’t just play the game in front of them but simultaneously plays multiple boards, sometimes defending, sometimes attacking, always thinking several moves ahead. That’s how sophisticated hedge funds operate in financial markets.
Why UHNW families use them: The goal isn’t necessarily to achieve the highest returns, but to generate consistent positive returns regardless of what traditional markets do. A good hedge fund might make 8-10% whether the stock market is up 20% or down 15%. During the 2008 financial crisis, while the S&P 500 crashed 37%, certain hedge fund strategies actually made money.
The trade-offs: You’re taking credit risk. If borrowers default, you might lose principal. Hedge fund performance has disappointed many investors over the past decade, with industry averages underperforming the S&P 500 after fees.
Typical allocation: UHNW families often allocate 10-20% to private credit and 10-20% to hedge funds.
Part 2: Specialized Alternatives
Tangible & Passion Assets
From art to classic cars, limited-edition jewelry, rare coins, and fine wine, UHNW individuals embrace all things luxury. For this group, “joy of ownership” is among the top reasons they collect luxury items. But investment return expectations are intertwined with this joy: 57% scrutinize and track the return potential of passion-driven investments.
Modern UHNW portfolios often maintain 10-20% in non-traditional alternative assets. The purpose is multiple: they generally aren’t linked to economic factors affecting stocks and bonds, they tend to appreciate alongside inflation, and they provide prestige. Owning a collection of fine art signals to investors and peers that you possess the means and insight to secure rare and valuable assets.
The trade-offs: These assets are vulnerable to physical hazards like fires and floods. Your investment can be destroyed completely. They’re also highly illiquid. It may take months or years to find a buyer. And future demand is uncertain. You may value a Michael Jordan rookie card, but will consecutive generations?
Impact & Sustainable Investing
According to Altrata’s Ultra High Net Worth Philanthropy 2024 report, UHNW individuals gave $190 billion to philanthropic causes in 2022, almost 25% more than in 2018. Education, arts and culture, and health care and medical research are among the top philanthropic causes for UHNW donors. Beyond traditional philanthropy, many are pursuing impact investing—intentionally allocating capital to generate measurable social or environmental benefits alongside financial returns.
There’s an important distinction between ESG screening (excluding tobacco, firearms, or fossil fuels) and true impact investing (directly funding affordable housing, renewable energy, or healthcare in underserved communities).
For families focused on intergenerational wealth transfer, impact investing serves a dual purpose: deploying capital effectively while instilling values in the next generation. Involving heirs in philanthropic decisions and in selecting impact investments can be invaluable education.
Part 3: Portfolio Construction & Tax Efficiency
Strategic Asset Allocation
Here’s a sample allocation for a $50 million UHNW portfolio:
- 20% U.S. Public Equities
- 9% International Equities
- 15% Fixed Income
- 15-20% Private Equity
- 10-15% Private Real Estate
- 10-15% Private Credit
- 5-10% Venture Capital/Hedge Funds
- 3-5% Tangible Assets
- 10% Cash
Notice the significant alternative allocation (nearly 50%) providing diversification beyond public markets. The meaningful cash position ensures you can meet unexpected expenses, make opportunistic investments, or meet capital calls without forced sales.
Illiquidity Management: The “J-Curve”
One of the biggest mistakes UHNW investors make is over-committing to illiquid investments. You don’t want to be forced to liquidate public holdings at a market bottom because you need cash and everything else is locked up.
Private equity and venture capital follow a “J-curve” pattern: They require capital in years 1-4 before returning capital in years 6-12. Make sure you can meet capital calls without selling other investments at unfavorable times.
A practical approach: Maintain 3-5 years of spending needs in liquid investments. Think of liquidity like keeping emergency supplies on hand. You might allocate 70% of your food budget to your garden (illiquid but high-return), while keeping 30% in your pantry (liquid and immediately accessible) so you don’t starve while waiting for vegetables to grow.
Tax-Efficient Strategies
Tax loss harvesting at scale: Sophisticated investors harvest losses across dozens of accounts. At the highest tax brackets, every $1 million in harvested losses saves $400,000 or more in taxes.
Think of your portfolio like a garden with both thriving and struggling plants. Rather than letting the struggling plants die as waste, you remove them strategically to offset the fertilizer costs (taxes) on your thriving plants, then immediately plant similar replacements.
Charitable Remainder Trusts (CRTs) allow you to donate appreciated assets to charity, receive a current tax deduction, avoid capital gains taxes, and receive income for life.
If you’re sitting on $10 million in highly appreciated stock, selling would trigger $2-3 million in capital gains taxes. A CRT allows you to avoid that tax completely while generating lifetime income. Think of it like a financial agreement with your favorite charity—you give them appreciated stock, they “sell” it tax-free and pay you income for life.
Part 4: Advanced Structures
Family Offices
Once your net worth exceeds roughly $50 million, establishing a family office often makes economic sense. Think of a family office as your personal financial services firm. Dedicated team managing every aspect of your family’s financial life: investments, tax planning, estate coordination, philanthropy, and family governance.
A family office is like having your own in-house orchestra instead of hiring individual musicians for each performance. The conductor (chief investment officer) ensures that all instruments (investment strategies) work harmoniously together, while section leaders manage their specific areas with an integrated approach.
When you’re working with five different advisors who don’t communicate, you might end up with overlapping investments, conflicting tax strategies, and estate planning that doesn’t integrate with your investment structure. A family office brings everything under one roof.
Asset Protection and Estate Planning Trusts
Domestic Asset Protection Trusts (DAPTs) allow you to transfer assets into a trust for your own benefit while protecting them from future creditors. Think of a DAPT like a financial safe deposit box with a time lock. You can still access what’s inside through the trustee, but creditors can’t break in because the law says it’s no longer legally “yours” to seize.
Spousal Lifetime Access Trusts (SLATs) allow married couples to remove assets from their taxable estates while maintaining indirect access through the non-donor spouse.
Imagine you’re carrying a heavy backpack (your taxable estate) up a mountain. You hand the backpack to your spouse, taking the weight off your shoulders, but your spouse can still access everything and share it with you. When you reach the summit (death), the backpack passes to your children without estate tax.
The One Big Beautiful Bill Act permanently increased the federal estate tax exemption to $15 million per person ($30 million for married couples) beginning January 1, 2026, with annual inflation adjustments thereafter.
A SLAT removes appreciating assets from your estate permanently while maintaining indirect access through your spouse. With the 40% estate tax rate on everything above the exemption, proper planning can save $10+ million in estate taxes for a $50 million estate.
Private Placement Life Insurance (PPLI) allows UHNW families to hold alternative investments inside a life insurance wrapper, providing tax-free growth. Think of PPLI as a Roth IRA on steroids—sheltering high-return alternative investments from taxation both during your lifetime and when passing to heirs.
Part 5: Building Your Strategy
Start with Purpose
Before considering any sophisticated investment, get clear on your wealth’s purpose:
- Lifestyle funding: How much do you need annually to maintain your desired lifestyle?
- Generational wealth transfer: How much do you intend to leave to children and grandchildren?
- Philanthropic impact: What charitable causes matter to you?
- Opportunistic investing: Do you want capital available to acquire businesses or seize opportunities?
These purposes drive different strategies. Lifestyle funding requires liquidity and income generation. Generational wealth can be invested with 30-50 year time horizons. Philanthropic giving might benefit from the use of CRTs and donor-advised funds.
Diversify Across Multiple Dimensions
UHNW portfolios should be diversified not just across assets but across multiple dimensions:
Asset class diversification: Public stocks, bonds, private equity, real estate, credit, commodities, and cash.
Geographic diversification: U.S., developed international, and emerging markets across all asset types. Global diversification offers entry points and value unavailable in some domestic sectors, especially as U.S. markets often contend with valuation pressures.
Manager diversification: Multiple fund managers within each strategy (several private equity funds, multiple hedge funds) to avoid concentration risk.
Vintage diversification: If you’re investing in private equity or venture capital, don’t put all your money into funds that start investing in the same year. Spread your commitments across multiple years, for example, by investing in new funds in 2025, 2026, and 2027. This way, you’re not buying everything at the same point in the economic cycle. Some years, companies will be expensive; some years, you’ll find bargains. It averages out.
Structure diversification: Assets held personally, in trusts, in LLCs, and in specialized vehicles like PPLI, ensuring no single legal challenge jeopardizes everything.
True diversification means assets that behave differently under different scenarios—investments that zig when others zag. Make sure your portfolio would survive various scenarios: high inflation, deflation, rising rates, falling rates, geopolitical instability, and recession.
Risk Capacity vs. Risk Tolerance
With substantial wealth, distinguish between risk tolerance (how much volatility you can psychologically handle) and risk capacity (how much risk you can financially afford).
A family with $100 million might have enormous risk capacity—they could lose 30% and still have more money than they’ll ever spend. But if market drops cause anxiety and poor decisions, their risk tolerance is lower than their capacity suggests.
Conversely, someone with “only” $15 million might have high risk tolerance (comfortable with volatility) but limited risk capacity since they need portfolio income to fund a $750,000 annual lifestyle.
Your investment strategy should reflect the more limiting of these two factors. No investment return is worth constant stress, but you also can’t afford to be so conservative that inflation erodes purchasing power.
Common Mistakes to Avoid
Confusing sophistication with superiority. Just because an investment is complex, illiquid, and has high minimums doesn’t mean it’s better. The financial services industry profits from complexity. Always ask: “What problem does this solve that simpler alternatives don’t?”
Ignoring estate planning until it’s too late. UHNW families sometimes focus intensely on investment returns while neglecting estate planning until their 70s or 80s. The trust structures you use in your 50s profoundly affect how efficiently you transfer wealth to the next generation.
Underestimating family governance. Research from The Williams Group, which studied over 3,200 wealthy families across 20 years, found that 70% of families lose their wealth by the second generation, and 90% by the third. The primary culprits? Breakdown in family communication (60% of cases) and inadequately prepared heirs (25%), not poor investment returns or excessive taxes.
Fee Management Still Matters
At $50 million, paying an extra 1% in fees costs $500,000 annually, $20+ million over a lifetime, compounded. Be skeptical of the traditional “2 and 20” fee structure (a 2% annual management fee plus 20% of any profits, meaning a fund earning 10% actually costs you nearly 4% in total fees). Many excellent managers now offer better terms to large investors. Everything is negotiable when you’re writing large checks.
Is This Level of Complexity Right for You?
$10-15 million: Many of these strategies introduce more complexity and cost than they’re worth. A well-structured portfolio of index funds, municipal bonds, and some rental real estate might serve you better.
$30-50 million: Strategies like private equity, private real estate funds, and sophisticated estate planning structures start making sense.
Above $100 million: Almost everything discussed in this article becomes relevant. You’re building a financial institution, not just managing a portfolio.
But even at UHNW levels, simplicity has value. Warren Buffett—worth roughly $130 billion—has instructed his estate trustees to invest 90% of his wealth in a simple S&P 500 index fund. Sometimes the best strategy is elegantly simple.
Ready to Develop Your Strategy?
Every UHNW family’s situation is unique. The optimal strategy for a tech entrepreneur who just sold their company differs dramatically from a third-generation heir managing family wealth or a surgeon who’s been steadily accumulating for 30 years.
What they share is the need for sophisticated, integrated planning that considers not just investment returns but tax efficiency, estate planning, asset protection, and family governance.
If you’re managing substantial wealth and want to explore whether advanced strategies make sense for your situation, I invite you to schedule a complimentary investment strategy session. We’ll review your current situation, discuss your goals and concerns, and outline potential strategies that might benefit your family.
[Schedule Your Complimentary Investment Strategy Session →]
Investment advisory services are offered through Great Oak Advisors, a registered investment advisor. This article is for educational purposes only and should not be considered investment, tax, or legal advice. Strategies discussed may not be suitable for all investors. Consult with qualified professionals before implementing any strategy discussed. Past performance does not guarantee future results. All investments carry risk, including potential loss of principal.
