Adapting active management strategies to HNW portfolios

The ultrarich may be different from you and me, but that doesn’t mean mainstream investors can’t profit from the family office strategies used to serve them. 

In working with clients and planners across a range of AUMs, I continually return to this realization. Most financial plans rely on models that prioritize liquidity and ease of management. Such portfolios rebalance smoothly, report cleanly and are simple to explain to clients. 

Yet convenience can come at the cost of long-term results. When flexibility takes precedence over durability, portfolios become vulnerable and clients are exposed to volatility, correlation risk and diminished compounding.

READ MORE: What’s hot with UHNW clients? BofA exec sees shift

Clients have been conditioned to treat accessibility to funds as a virtue lauded for its flexibility and marketed as a safeguard. But when liquidity becomes the central guiding principle of a long-term financial plan, portfolios reactively gravitate toward crowded markets, amplifying correlation risk and leaving clients more exposed to volatility — not to mention emotionally driven decision-making.

By contrast, ultrahigh net worth clients play for keeps. They know the real advantage lies in challenging the standard playbook by rethinking risk, time and opportunity. 

The 60/40 fallacy

The unspoken assumption behind the 60/40 model is that constant market access is inherently good and convenience builds confidence. But in my experience these attributes encourage reaction over reflection, especially in volatile markets. What seems prudent on paper can become destabilizing in practice, leading to misalignment with client goals. 

As an optimistic entrepreneur wired for risk, I’ve come to understand that true compounding requires consistency while guarding against losses that can quietly erase years of progress. The traditional portfolio mix thrived when bond yields were higher and public markets were less synchronized. Today, both asset classes often move in tandem to macroeconomic shocks. Diversification alone is no longer enough.

Designing for permanence

Family offices take a fundamentally different approach. They choose endurance over flexibility. They lean into illiquidity and favor control and complexity when they support a larger goal: long-term compounding with fewer interruptions.

READ MORE: When everybody’s a ‘family office,’ what’s the term really mean?

In 2024, global family offices allocated an average of 44% to alternatives: 21% private equity, 11% real estate, 4% private debt and 8% other private strategies, according to the UBS Global Family Office Report. These allocations are central to how wealth is preserved and grown over generations.

Private debt, in particular, is gaining traction, with allocations doubling from 2% in 2023 to 4% in 2024 and projected to continue climbing. These strategies are mainstream among the uberwealthy. They offer the value of consistency, yield and insulation from public market swings. 

Family offices also plan holistically, integrating every investment with tax strategy, estate planning and intergenerational goals. Their focus is continuity, not just portfolio construction. 

These six family office principles can improve outcomes across AUM levels and reduce long-term risk.

Reframe liquidity

Two competing truths: Many clients require full access to capital but too much can backfire. Accessibility fuels short-term thinking, panic selling and weakened discipline. Purposeful illiquidity promotes patience, quiets noise and often delivers better outcomes.

Introduce alternatives early

Private credit, tangible assets and select private equity are now widely accessible through feeder funds, interval funds and direct offerings. Advisors should demystify them early on to build client confidence and position alternatives as core, not complementary.

READ MORE: The risks of investing in private equity 

Prioritize volatility control

Volatility is the enemy of compounding. A 30% loss demands a 43% gain to break even. Portfolios should be designed to pursue steadier growth. The goal isn’t to eliminate risk, but to limit its ability to derail long-term progress.

Integrate tax strategy

Tax drag is silent but significant. Savvy investors build tax strategy into portfolio design from the start. Alternatives like real estate and private credit offer built-in advantages — depreciation, deferral and preferential treatment — that enhance long-term, after-tax wealth.

Manage actively

Active management, when applied with intention, can complement a resilient portfolio. Family offices often emphasize manager selection and niche strategies that aren’t available in public markets. Their aim? To sidestep systemic risk and tap into return streams that behave differently.

Build a legacy

Even during the global sell-off in April 2025 and rising macroeconomic pressure, family offices largely stayed the course by maintaining long-term allocations rather than chasing temporary safety. Their portfolios were structured to endure pressure. That’s the power of planning for permanence. 

Family offices optimize for longevity, measuring success in decades, not quarters, and across generations. Their portfolios are structured, disciplined and built to withstand stress. Liquidity is a tool, but not a crutch. Volatility is managed by design. Compounding is protected like an asset class in itself.

For high net worth advisors, the takeaway is clear: Thoughtful active management has a role, especially when aligned with illiquid or differentiated asset classes. What matters most is having clarity of purpose and the discipline to stick with it. They should tailor the best of institutional strategy to real-world clients. I’m arguing for intentionality. It’s time to build portfolios that endure.