Instead of using an arbitrary percentage, Gorham Thomason of AKO Capital determines maximum position size based on a stock's liquidity. This ensures the fund can exit a large position without crashing the share price if the investment thesis sours, providing a practical risk management framework.

To manage the perceived risk of a highly concentrated fund, Mohnish Pabrai advises investors to size their position appropriately relative to their total net worth. By recommending investors allocate less than 20% of their wealth to his funds, a single stock representing 50% of the fund becomes a more manageable 10% of the investor's total assets.

Allocate more capital to businesses with a highly predictable future (a narrow "cone of uncertainty"), like Costco. Less predictable, high-upside bets should be smaller positions, as their future has a wider range of possible outcomes. Conviction and certainty should drive allocation size.

PGIM intentionally underweights popular sectors like software, not due to a negative view, but to maintain broad diversification. They believe the risk-reward in illiquid credit is punitive for concentration and focus on finding relative value across the economy, even in "boring" industries, rather than chasing overbought trends.

For GQG, a "quality" business is defined by its high barriers to entry, not its lack of earnings cyclicality. This framework allows them to own seemingly non-quality, cyclical businesses like energy or steel, provided the specific assets are irreplaceable and competitors cannot easily replicate them.

Capital Group's unique "Capital System" empowers analysts to invest client assets directly, rather than just issue ratings. This instills a deep sense of ownership and responsibility, forcing them to consider portfolio risk and diversification beyond a simple buy/sell recommendation.

David Kaiser reveals his model specifically limits exposure to financial stocks. Because financials frequently screen cheap on metrics like price-to-book, a pure value model can become dangerously over-concentrated in the sector. The limit is a pragmatic override to ensure diversification and avoid the unique, often hidden risks inherent in banks.

A powerful risk management technique is setting a maximum percentage of your portfolio that can be invested in a single stock *at cost*. A 5% at-cost limit means once you've invested 5% of your capital, you cannot add more, even if the stock price plummets and its market value shrinks. This prevents chasing losers.

The strategy of concentrating an entire fund into a single asset creates intense psychological pressure. This forces a rigorous focus on capital preservation and downside scenarios, shaping both business selection and capital structure decisions, rather than just focusing on the upside case.