As tech stocks soar, executives use exchange funds to diversify wealth without selling

Core Insights - The tech stock boom has created significant wealth for employees, but having too much net worth tied to one stock poses risks [1] - A common guideline suggests that no single stock should exceed 10% of an investment portfolio [1] Group 1: Risks and Opportunities - Founders and long-term employees face substantial capital gains taxes when selling long-held stock for reinvestment, presenting both risks and opportunities [2] - Diversification strategies, such as contributing shares to exchange funds, can mitigate these tax implications [2] Group 2: Exchange Funds - Exchange funds, or swap funds, allow multiple investors to pool shares and receive a partnership interest, redeemable for a diversified basket of stocks after a lock-up period, typically seven years [3] - The popularity of exchange funds has increased recently, particularly due to strong stock market returns driven by advancements in artificial intelligence [3] Group 3: Equity Compensation Trends - Publicly held tech companies are increasing equity compensation to attract talent, especially in competition with emerging AI startups [4] - Exchange funds generally allocate 80% of their assets to stocks, aiming to mirror benchmark indexes like the S&P 500, while the remaining 20% is held in non-security assets, often real estate [4]