The Private-Market Risk Family Offices Haven't Prepared Their Heirs For

Family offices are ready to take more risk. They are less ready to hand over the keys. Both facts landed in the same news cycle.

Ocorian's latest survey finds that three-quarters of family offices plan to increase their risk appetite, and private equity is leading the shift. The firm credits growing transparency in alternatives for the move. Campden Wealth, covering the same ground, concludes that generational unpreparedness, not market conditions, is the principal threat to family wealth. Next-generation engagement remains low.

Put the two findings together and the problem is plain. Private equity is a long-duration, illiquid asset whose value is hard to read quarter by quarter. It asks an institution to sit through markdowns, fund capital calls, and tell a bad company from a bad quarter. That job belongs to a fully delegated investment committee. A family office with an unengaged next generation does not have one.

Cerulli reports that 89% of firms identify structured family meetings as a key best practice for ultra-wealthy families. The practice is known. It is not universal. That gap is the risk.

Underprepared governance has a price. Quebec's La Caisse returned 5.1% in the first half, below its benchmark, after private-market losses wiped out gains in listed equities. La Caisse is a large institutional investor with the private-market expertise to absorb that kind of markdown. A family office making the same allocation with an under-trained next generation takes on the same risk without those shock absorbers.

At the same moment, the industry is making private markets easier to enter. Pershing Square is planning a pre-IPO venture fund that would give allocators exposure to its own private stakes and family-office holdings. Robinhood is accelerating its closed-end private-market fund debuts. CAIS, the alternatives platform for RIAs, just doubled its valuation to $2 billion with a $170 million investment from Vista Equity Partners. The channels differ, but all of them widen the funnel through which family offices can pour into private markets.

Integrated Partners, a $25 billion RIA, has launched SIGIL Family Office, a virtual family office for ultra-rich business owners. It exists because families want institutional-grade governance without standing up an entire single-family office. The governance gap has become a business.

The Grady-White Boats transaction offers a different answer. Owner Eddie Smith Jr. turned down a $400 million sale, put the company in a perpetual purpose trust, and pledged 95% of future profits to charity. That structure removes the family from ownership entirely, replacing inheritance with a philanthropic mandate. Outsourced governance and trust-based stewardship respond to the same fact: the traditional model of a founder running everything while the next generation waits in the wings does not fit the asset mix family offices are now choosing.

A family office that commits to private equity today is signing a contract that extends well into the period when the next generation is expected to govern. According to Campden, that generation is not engaged. The investments will be there, demanding attention, under young stewards who were not prepared for them. The result is not a market failure. It is a governance failure that shows up as an investment failure.

Private markets are not the problem. Succession planning needs the same rigor as investment due diligence. Family meetings should do real work: setting risk budgets, debating capital calls, rehearsing a market shock. Next-generation members should sit on investment committees while the senior generation still has veto power. The firms in Cerulli's 89% do not convene those meetings because they are pleasant. They do it because the asset mix now demands it.

Family offices are right to pursue private equity. They are wrong to pursue it with a governance model built for the last generation. Risk appetite is easy. The hard part is making sure the people who inherit the risk are ready before the assets are locked in.