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How Family Offices Should Address Private Markets When Valuations Are "Stretched"

Tom Burroughes

11 November 2025

When family offices and other investors contemplate the state of private equity and credit, and the valuations of AI, a word that comes up is “stretched.”

The private market and Big Tech sector has been on an astonishing ascent. With private markets across all categories, the sector that had boomed on the back of ultra-low interest rates after 2008, a structural shift from listed to unlisted markets, and a desire for yield, created a $11 trillion-plus industry. (source: Preqin, May 2025). Wealth managers have been cajoled about needing to have capabilities in this sector. To illustrate the level of interest, in early November Charles Schwab agreed to shell out $600 million to buy private markets platform business Forge Global Holdings. 

There are a few red flags fluttering in the breeze, however. In October, Kristalina Georgieva, head of the International Monetary Fund, reportedly said the potential risk from private credit “keeps me awake every so often at night...We know that the non-banking financial institutions do not enjoy the same level of regulatory oversight as banks do.” Concerns about the $3 trillion private credit sector have been sparked by the collapse of US subprime auto lender Tricolor, and auto parts supplier First Brands. The IMF has been concerned for some time: In April 2024 it said the sector posed risks, albeit not yet systemic.

The spike in interest rates after the pandemic put a chill into sectors such as private equity buyouts and venture capital. Exits have taken longer to execute and with a backlog of investments to complete; the big shops such as KKR, Blackstone and Carlyle are now targeting the mass-affluent and HNW audience with entities such as open-ended, “evergreen” funds that are, so it is hoped, a less daunting entry point for rookie investors. Secondary funds – holding stakes in private investments that are bought from their original investors – are more prominent, suggesting a greater demand for liquidity to achieve more efficient price discovery. 

To add fuel to the fire, the Trump administration has signalled that 401(k) plans can hold private markets, and the Accredited Investors regime has been tweaked. In Europe, the EU has its ELTIF structure for investors and the UK has its Long-Term Asset Fund. Momentum appears unstoppable.

Nico Giedzinski, head of US family offices and offshore at is something that we have been looking at very closely. People are paying much more attention to valuations…valuations are stretched but that’s across the board with public equities. An enormous amount of liquidity has gone into the market,” Giedzinski told this news service.

In terms of deploying capital into private markets, family offices/others are “pausing a bit and looking at their current investments,” he continued. Family offices in general have not been happy about DPIs, aka Distributions to Paid-In Capital. (This measures the cash that’s returned to investors relative to the capital they put in.)

AI and how to play it
Nico Giedzinski also discussed how clients want to profit from the AI story – and without getting hurt.

Investors are also wrestling with the lumpy valuations of AI-adjacent firms. In 2025 to 2026, capex in the artificial intelligence space is slated to be in the region of $450 to $500 billion. Return on invested capital is about $13 billion. Actual returns are far off justifying the outlays, requiring a massive revenue growth to achieve this.

“All are trying to understand what the best way in general is to invest in AI, which is expensive now. Valuations are stretched in many places in the market,” Giedzinski said. That makes diversification crucial. “There is an over-concentration of names out there.”

The 10 largest firms by market capitalisation, heavy with technology giants, account for 40 per cent of the total (S&P 500 Index).

Some sense of how wealth holders think about investment came through in the recent 2025 Global Investor Insights Survey from Schroders. The report shows that among asset managers, 56 per cent said public equities appeared to offer the best return opportunities, and 40 per cent said this of private equity. Among institutional investors, the pattern was somewhat reversed: 43 per cent said listed equities offered the best outcome, and 47 per cent chose private equity. 

Turning to private credit, the report said that 38 per cent of wealth gatekeepers gave it as their best return candidate, while 40 per cent of institutional investors did so. 

The private credit space boomed post-GFC as traditional banks’ lending was squeezed by new capital rules; low interest rates boosted the sector. 

It has led to problems. “A lot of investors such as small equity shops have not specialised in private credit before for a long time are launching funds and that’s concerning,” he said. “We might find investment companies willing to underwrite deals that should be more covenant-heavy than they are at the moment.” 

Diversification opportunities exist in areas such as insurance-linked securities, forms of securitised credit, and infrastructure, such as involving energy transition, Giedzinski added. 

It is fair to say that Giedzinski and his colleagues have a lot on their plate.