Why do people with larger portfolios need more sub-asset classes/funds?

Multiple sub-asset classes exist because they have different return characteristics and are used by fund managers to construct and manage your money. A Diversified sub-asset class where the fund manager makes the allocation decision is a good way to participate in multiple sub-asset classes.

With a larger portfolio, you have the ability to allocate across more sub-asset classes in a meaningful way and can do so directly.