Financial Planning - November 2012

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of a holding. To create one, Sardana helped his clients buy put options at the floor of a target price range. Corresponding call options at the top of the range capped the upside. This strategy is used to restrict the sale of shares to a price between, say, $9 and $10.

Sardana used this strategy for a client
who, at one point, held $200 million in
the stock of a very large computer net-
working company that had purchased
two companies he founded. The con-
versation started on a similar footing
as the one with his InfoSpace client. “I
said, ‘Hey, why don’t we sell some?’”
the planner recalls. “He said, ‘This is
easier to make the money,” he says,
“but much harder to hold on to it.”
Certainly, if there’s one lesson for
planners in Silicon Valley, it’s that mon-
umental loss often goes hand-in-hand
with monumental gain.

If there’s one lesson for planners in Silicon Valley, it’s that
monumental loss often goes hand-in-hand with monumental gain.

going to be the first $1 trillion company.’
I said, ‘If you had $200 million, would
you put it all in this one stock?’”
That line of argument worked, to a
certain extent. The client gave Sardana
$40 million to invest and the $160 mil-
lion balance to a broker at UBS. “A year
later, the client calls me up and says,
‘I have bad news,’” Sardana says. The
UBS broker had diversified him into
other tech stocks that went down. As
with the InfoSpace debacle, the tax
man came knocking. But due to Sar-
dana’s hedged holdings, the client was
able to pay his tax bill.

He moved the rest of his portfolio to Sardana, who helped him hang on to a net worth in the high double-digit millions, Sardana recalls, at a time when many of his friends were wiped out by similar missteps. “In some ways, it’s

most of whom have made their fortunes in hardware and software, and about 70% of whom are Indian.

In his work, he rolls the dice regularly — if cautiously — alongside his clients. Two years ago, his firm began hosting venture capital forums routinely attended by a dozen or more clients. “The way it started is our clients would call me up and say, ‘Hey, I am investing in this company. Do you have any other clients who might be interested?’” he says. Instead of calling clients one by one, they would hold a meeting and the primary investor would bring in the entrepreneur to answer questions.

“If a client comes in and says, ‘I’m
not tech savvy,’” Sardana says, “I tell
them, ‘You have to make your own
decision.’ We make sure they don’t get
Valley. “You couldn’t do that in a large
financial institution.”
From 2008 to 2011, for example,
Sardana and a group of clients, includ-
ing Mehta, put together a limited liabil-
ity company to take advantage of the
depressed real estate market by buying
and flipping homes. After distributing
the proceeds, Sardana and his clients
are now putting together another fund.