TTHE BUBBLE CONUNDRUM

THE BUBBLE CONUNDRUM AND 2025 LESSONS FOR FAMILY OFFICES

By Barbara Stadermann and Peter Brock

2025 was an intense year – although in politics more than in investing. The tech rally eventually went on – amid rising doubts. Now, the question is whether it will continue next year or we have to face significant setbacks. As always in a supposedly mature bull market analysts make offers for all sorts of faiths, ranging from a ‘the end is near’ tone to a ‘this time is different’ mode. 

BeeWyzer being active not only in Europe, but with insights also in Asia, the Middle East and Latin America, we would like to share some thoughts on the state we are in that are valid globally: As most family offices hold a big part of their wealth in illiquid assets you may assume that this ‘bubble conundrum’ matters less to them than to a normal private investor. This may be a wrong way of looking at things:

• When the exit via the stock market for private equity is locked, valuations will ceteris paribus drop.
• When the cost of financing rises, all leveraged investments will show a lower return.
• When liquidity is reduced, adjustments in asset allocation become more difficult.
• When liquidity needs of the family are met with liquid assets, there is a link of markets and income.
• Absolute return models often do not cope with market jitters easily and show lousy performance.

Besides these points of general wisdom, there are family office lessons to be taken from 2025 that add to this:

• Legal and technical developments increased asset transparency a lot. The OECD announced in December that 26 countries agreed to implement automatic exchange of cross-border property, making this asset class less ‘quiet’ (IPI MCAA). The common reporting standards CRS will include real estate for the first time. The Crypto-Asset Reporting Framework is about to be rolled out, bringing digital assets to the same level as bank accounts.
• The reaction of wealthy families to rising risk globally with more complex structures thus loses grip.
• If transparency is the new standard, governance becomes more important than structure. Because in this environment structures only make sense when based upon a consistent governance that also tackles a global taxation design.
• In the Nextgen process, this has implications as well: stewardship comes before ownership, when young family members are assigned specific roles before assets are being transferred. A huge amount of post-war wealth will be transferred to the next generation over the coming years and thus financial education on how to deal with it becomes ever more important. And -surprise, surprise- Nextgens do some things differently.
• All in all, family offices worldwide are maturing at high speed from relationships to institutions. The highly personalized, often founder-centric and informal organization becomes a model of the past. Globally, wealthy families will be evaluated explicitly or implicitly by a coherence test:
  - Does the structure match actual behavior?
  - Does behavior align with documentation?
  - Will the story remain consistent across jurisdictions and service providers including advisors?

In a nutshell: 2025 was challenging in many respects, even though most investments were running smoothly. But for those that understood the structural changes that are in the offing for family offices, it was a good preparation for everything to come.

But what about the bubble we started this article with? Well, if this is a bubble, it may stay or burst in 2026. And when it bursts, nobody can give you the exact date. But maybe something is different this time and we do not face a simple boom or bust situation. AI, deep tech, blockchain and quantum computing will be a source of immense growth, that’s for sure. After all, stock market valuations are often more an interpretation game than tangible science.

But nobody is able to predict, which sectors will benefit most and over what time span. So maybe it is not that one big bubble we face this time, but a number of smaller bubbles that will not burst simultaneously, but one at a time? Leaving you with this thought we wish you a great start into the new year!