Why Family Offices Are Over-Diversified — and What to Do About It: A Conversation with Julia Rees Toader of PrinCap
Julia Rees Toader, Founding Partner of PrinCap
Episode 13 of the AYU Family Office Podcast
After 12 years at Goldman Sachs advising the chief investment officers of sovereign wealth funds and pension plans, Julia Rees Toader has looked at approximately 20,000 portfolios built by professionals for wealthy families. Her conclusion is provocative: most of them are wrong. In Episode 13 of the AYU Family Office Podcast, Julia — founding partner of outsource CIO firm PrinCap — explains why, and what better portfolio construction looks like for family offices.
The Problem With How Family Office Portfolios Are Built
Julia has a word for what she sees in the majority of family office portfolios: "deversification." Too diversified. "Families did not get to be a family office by being too diversified. And yet when the professionals get involved, that's exactly what happens."
The dynamic is understandable. Financial advisors default to the balanced, multi-asset portfolio low volatility, steady returns, something defensible. "A portfolio designed to give you mid single digit returns that's typically not the right fit for a family. They want to express themselves more. They want to be taking more risk." The result is a portfolio that feels disconnected from the family's actual wealth creation story.
Luxury Inflation: The Hidden Challenge
One of the most compelling insights Julia raises is the gap between headline inflation and what wealthy families are actually exposed to. "Families are not exposed to headline inflation. They're exposed to luxury inflation which is normally twice as high." Properties, school fees, fine dining, travel, collectibles — these don't track the CPI. A portfolio built to beat headline inflation by 2% may be losing real purchasing power in the world a family office actually inhabits.
Having the Risk Conversation Properly
The critical skill Julia has developed is the ability to translate the abstract language of portfolio theory into something a principal can actually feel. "You can't go to an amazing engineer and say 'you have 7.8% standard deviation.' It doesn't resonate." Instead, she reframes risk in terms of potential losses specific drawdown scenarios, expressed in plain language. "Risk has to be felt in the belly." This is the foundation of building a portfolio that will actually be held through downturns.
What an Outsource CIO Actually Does
PrinCap works with ultra high net worth single family offices as an outsource chief investment officer. Some clients are highly sophisticated in certain areas and want supplementary expertise elsewhere. Others want a single trusted partner across their entire portfolio. In both cases, the defining feature is alignment being on the same side of the table as the family. Julia draws the line for family office status at around $100 million in investable assets.
Tokenisation, Real-World Assets and AI
Julia is also watching the emerging frontier closely. Tokenisation of real-world assets, the growing role of AI in portfolio analysis, and the expansion of the alternatives universe into new categories — all of these are reshaping what a family office portfolio can look like. For [family offices](https://www.thisisayu.com/membership) willing to invest in understanding these developments, the opportunity set is expanding rapidly.
Listen to the Full Episode
Episode 13 of the AYU Family Office Podcast is available now on Spotify and all major podcast platforms.
Not yet an AYU member?
Sponsored by Canoe Intelligence