Diversify, Defer Taxes, Hedge, Monetize

The client’s view of future stock performance will determine the best strategy. Some of the strategies we can employ to diversify a client's concentrated portfolio are:

Costless Collars are best for investors who want to protect against stock price depreciation and receive average market returns  Cash can be obtained through a credit line.

Variable Prepaid Forwards generate inexpensive cash to diversify.  The cash is inexpensive because the investor is selling a more valuable call .

Exchange Fund: The investor contributes certain concentrated equity positions of low basis or restricted shares in exchange for units of a professionally managed and diversified equity portfolio.

Charitable Remainder Trust: A charitable minded investor contributes assets to a split-interest charitable trust in exchange for an income for life (and possibly the lives of other beneficiaries. Assets diversified and professionally managed; out of investor's estate but may be replenished to the heirs with the addition of a wealth replacement trust. At least 10% of the assets must be left to charity.

Strategy	Diversify	Defer Taxes	Hedge	Monetize
Outright Sale	Yes	No	Yes	Yes
Protective Put Option	No*	Yes	Yes	No*
Zero Premium Collar	No*	Yes	Yes	No*
Prepaid Variable Rate Forward	Yes***	Yes	Yes	No*
Exchange Fund	Yes	Yes	Yes**	No*
Charitable Remainder Trust	Yes	Yes	Yes	Yes
Borrowing on Margin	Yes***	Yes	No	Yes

* Except if combined with a loan.
** Since the position is almost completely diversified, there exists relatively little upside or downside exposure to the single position.
*** Diversification may be obtained when proceeds are reinvested into other investment vehicles.