Amid the exuberance surrounding private markets and AI investments, valuations are increasingly described as “stretched.” After years of easy money and a surge of capital into unlisted markets, family offices now face a more complex environment—one where discipline, liquidity awareness, and diversification matter as much as opportunity.
Private markets have grown into an $11 trillion industry, buoyed by structural shifts away from public markets and the search for higher yields. Yet red flags are emerging: the IMF has repeatedly warned that private credit’s rapid expansion poses potential risks, with defaults such as Tricolor and First Brands raising concerns about regulation and transparency. The post-pandemic rise in interest rates has also slowed exits, prompting large firms like KKR and Blackstone to court new investor segments through evergreen vehicles and secondary funds that provide liquidity.
Policy tailwinds—from U.S. 401(k) inclusion to the EU’s ELTIF structure—are sustaining momentum, but valuations remain lofty. Schroders’ Nico Giedzinski, who advises family offices on U.S. investments, notes that while liquidity has poured into markets, many investors are pausing to review existing commitments and question return efficiency. Distributions to Paid-In Capital (DPIs) have been underwhelming, leaving some family offices hesitant to reallocate.
The same “stretched” story extends to AI. Global capex in the sector could reach $500 billion in 2025–2026, yet the returns so far amount to a modest $13 billion—a disconnect that underscores the speculative nature of the boom. Giedzinski warns of over-concentration risk: the top 10 firms, dominated by tech giants, make up 40% of the S&P 500’s market cap. Family offices eager to benefit from AI must therefore focus on balanced exposure and patient capital.
Schroders’ latest Global Investor Insights Survey highlights the tension: while over half of asset managers see the best opportunities in public equities, nearly half of institutional investors still prefer private equity and private credit. But as more non-specialist firms rush to launch private credit funds, underwriting standards may slip—raising the prospect of future losses.
Against this backdrop, diversification across insurance-linked securities, structured credit, and infrastructure (especially energy transition projects) is gaining traction. The challenge for family offices is not merely accessing private markets but navigating them intelligently—balancing enthusiasm with prudence in a high-valuation world.
