From clogs to clogs, family office, and the steepening rate of decline in private markets

It is an inconvenient truth that families go from clogs to clogs in three generations, as those who inherit their wealth steadily fritter it away. And the rate of decline could be steepening.

According to Williams Group, a US succession advisor, 70% of families lose control of assets under the second generation: “The contrast points to a growing governance gap within multigenerational families.”

Williams calls for better communication across generations, education, and an expanded role in governance for independent trustees. 

The UK’s Schroder family has just raised £4.2 billion by selling control of their asset management business to US-based Nuveen. You couldn’t get a better signal that a bear market is on the way than that

Maybe this will make a difference. But investment choices will need to do the heavy lifting to stop family offices from fading into irrelevance so quickly.

Advisors like to look in the rear-view mirror to argue that family offices should improve their outlook by piling into private assets to avoid stock market volatility. But a lot depends on the assets they buy, and recent developments suggest family offices would do best not to take the argument too seriously.

Tyler Cowen is an economics professor at George Mason University. In 2023, he argued that Western investors have been sheltered in a bubble since the Second World War by US hegemony, facilitated by economic growth and benign technological development. 

 Eighty years of stability produced steady growth and ideal conditions for private equity managers to prey on corporate inefficiencies. 

But those days have gone. President Trump has been working to dismantle US hegemony, arguing it costs taxpayers far too much.  Elsewhere, AI (and social media) push us towards radical change at a speed and scale never experienced before. Recent prosperity has been anchored on big tech, but now it is taking on a mountain of debt to stay relevant. 

According to Cowen: “Hardly anyone … is prepared to live in actual ‘moving’ history.  It will panic many of us, disorient the rest of us, and cause great upheavals in our fortunes, good and bad…The absolute quantity of the bad disruptions will be high.”

This means it is not a good time to bet the ranch on private businesses, which are hard to run properly in periods of volatility and even harder to sell. Owners also have to take charge of governance, rather than relying on the stock market.

 Family offices have already experienced disruption in real estate ventures due to the digital revolution, which enables people to work remotely and buy goods online. 

Values have fallen, undermining the security they offer to loans. New real estate opportunities have emerged, notably data centres, but their future depends heavily on the operating profits of their operators. 

Venture capital, sold to investors through narratives rather than operational skill, has badly disappointed family offices.  Since the peak of the boom in 2022, according to PitchBook. 70% of VC-based exits have been sold at less than the capital they raised. 

For example, the education start-up Byju’s has been knocked sideways by a funding crunch and allegations of fraud despite raising $6.3 billion. It is one of several Indian ventures to face severe problems, decimating local VC demand.

Private equity has also suffered badly. According to Goldman Sachs, exit premiums went into reverse in 2025 for the first time in decades.  

Private equity firms have seized on private credit to finance secondary transactions, enabling them to more easily sell portfolio companies to each other while M&A and IPO markets are depressed. But private credit yields ranging up to 12% are sub-prime and investors pulled $7 billion from the sector at the end of 2025.

More scary still, market investors have lately been dumping stock in tech companies that offer software-as-a-service, fearing that AI will eat their lunch. Many of these companies have been at the core of family office acquisition strategies.

Bessemer Venture Partners invented a cloud index for software companies, which started off with a bang. Over the last three months, it has fallen 19%, while the S&P is up 5%. Over a year, it is down 30%, while the S&P is up 11.8%.

Anthropic, a US public benefit corporation run by Dario Amodei and his sister Daniela, unveiled AI products in February, threatening to outcompete software enterprise stocks, led by Marc Benioff’s Salesforce, down 42% in a year.

According to Roger Montgomery, founder of private client adviser Montgomery Investment Management: “The disrupters will be disrupted, and many are forced to disrupt their legacy business revenues in order to survive. And through that process, they emerge smaller than before.”

Insurance broking stocks were hit this February following the release of an AI tool by insurance shopping platform Insurify. Data specialists like Thomson Reuters are expected to struggle as AI expands. AI is also starting to compete with supply chain managers.  

Intelligent drone companies like AeroVironment are outperforming diversified defence stocks because of the perception that AI will play a bigger role in future warfare. Fast-fashion companies like Shine are gaining market share at the expense of more traditional value retailers like Primark, which the Weston family may spin off after a major write-down in its value. 

Far from specialising in private assets, top-rated investor MFS says investors should spread their bets: “As AI matures, fundamentals, not narratives, are driving dispersion. In our view, this environment rewards investors who remain selective and connect the dots between valuation,  fundamentals and long-term durability.” Which looks a lot more sensible than walking into the private asset casino and plonking all your money on red. 

There are signs that more active managers are starting to outperform passive managers, whose indices are anchored in old-tech stocks. Good hedge funds, able to go both long and short, are even better placed to take advantage of volatility.  

Their average return of 12% was one of the best in years. Some gains stretched to 55%. These are the kind of returns which bets on private assets will struggle to match in the years ahead.  

In fact, the UK’s Schroder family has just raised £4.2 billion by selling control of their asset management business to US-based Nuveen. You couldn’t get a better signal that a bear market is on the way than that.