The quiet cost of complexity in a private portfolio

A portfolio built over twenty years across three advisers, two custodians and a handful of legacy positions tends to arrive with a particular kind of problem. Nothing in it is obviously wrong. Collectively it is unmanageable.

Complexity carries three costs that rarely appear on a statement. The first is fee layering — a fund of funds sitting inside a wrapper inside an account with its own advisory fee. The second is tax friction, where overlapping strategies wash out each other's losses. The third, and largest, is attention: every additional line item is a decision the family has to revisit.

We are not against complexity in principle. Private markets, direct indexing and hedged strategies all earn their place in a portfolio of sufficient size and time horizon. The test is whether the complexity is being underwritten by an expected return that is durable, or by the fact that it is difficult to unwind.

In practice, the first year with a new family often involves removing more than we add. That is usually where the largest measurable improvement in expected outcome comes from.