In this episode of Financial Perspectives, host Tanya Suba-Tang sits down with Kimberly Flynn, CFA - founder and president of XA Investments - to discuss the rapidly changing landscape of alternative investments. Following a period of disappointing returns for traditional asset classes, institutional and retail investors alike are seeking diversification and yield in the private markets.

Key topics covered include:

1. The Rise of Private Credit: How the disintermediation of banks has created a gap for direct lending and private credit to fill.
2. Emerging Opportunities for 2026: Why asset-backed lending, real estate debt, and infrastructure debt are becoming essential for income-oriented investors and retirees.
3. Breaking the 60/40 Mold: The catalyst behind the 20–25% growth in the interval fund market and the push to include alternatives in 401(k) plans.
4. The "Tangibility" Factor: Why wealth managers are turning to real assets like data facilities and infrastructure to help educate first-time alternative investors.

Whether you’re an institutional investor, advisor, or finance professional, this episode provides a forward-looking perspective on how private markets could transform portfolio construction in the years ahead.

Companies mentioned in this episode:

1. XA Investments
2. CFA Society San Francisco

Lindsey Helman: Hello and welcome to Financial Perspectives, a CFA Society San

Lindsey Helman: Francisco podcast, where we interview and discuss trends

Lindsey Helman: with leaders from across the investment and finance industry.

Lindsey Helman: This month, our host, Tanya Suba-Tang, Membership Director

Lindsey Helman: with CFA Society San Francisco, had the pleasure of speaking

Lindsey Helman: with Kimberly Flynn, founder and president of XA investments.

Lindsey Helman: Listen in as they discuss how

Lindsey Helman: alternatives and private markets

Lindsey Helman: are shaping the future of

Lindsey Helman: portfolio construction.

Tanya Suba-Tang: Hi, Kim. Welcome to Financial Perspectives.

Tanya Suba-Tang: How are you today?

Kimberly Flynn: Oh, I'm doing well.

Kimberly Flynn: Thank you.

Tanya Suba-Tang: Thank you so much for joining me on this show.

Tanya Suba-Tang: So for all our listeners, Kim is

Tanya Suba-Tang: the founder and president for XA

Tanya Suba-Tang: Investments.

Tanya Suba-Tang: And your firm focuses mainly on alternative investments.

Tanya Suba-Tang: Is that correct?

Kimberly Flynn: That's right.

Kimberly Flynn: We do.

Kimberly Flynn: Yeah, we we're about to celebrate our tenth anniversary

Kimberly Flynn: and the entire time building on, demand for alternatives.

Kimberly Flynn: And I think there's been a huge increase in that demand over

Kimberly Flynn: that period of time.

Tanya Suba-Tang: That is fantastic, because today

Tanya Suba-Tang: I want to talk about all things

Tanya Suba-Tang: alternative, but specifically

Tanya Suba-Tang: talk about, you know, everything

Tanya Suba-Tang: that everybody wants to talk

Tanya Suba-Tang: about lately is private markets,

Tanya Suba-Tang: right?

Tanya Suba-Tang: It's been kind of buzzing around these couple of months.

Tanya Suba-Tang: So kind of jumping into it.

Tanya Suba-Tang: I am really curious about your

Tanya Suba-Tang: perspective on the main

Tanya Suba-Tang: geopolitical and economic

Tanya Suba-Tang: factors driving institutional

Tanya Suba-Tang: investors globally to allocate

Tanya Suba-Tang: more capital to alternative

Tanya Suba-Tang: assets.

Tanya Suba-Tang: And what do you think is behind this trend?

Kimberly Flynn: Well, I mean, I think if we all

Kimberly Flynn: remember back just three short

Kimberly Flynn: years ago, at the end of twenty

Kimberly Flynn: twenty two, you know, investors

Kimberly Flynn: worldwide were disappointed by

Kimberly Flynn: both equity and fixed income

Kimberly Flynn: performance.

Kimberly Flynn: So neither traditional asset class performed.

Kimberly Flynn: And I think in that three year

Kimberly Flynn: period since that disappointing

Kimberly Flynn: twenty twenty two where, you

Kimberly Flynn: know, usually you can count on

Kimberly Flynn: one side of the portfolio for

Kimberly Flynn: diversification.

Kimberly Flynn: in this case, both produced negative returns.

Kimberly Flynn: institutional investors have long been diversified into

Kimberly Flynn: private market investments.

Kimberly Flynn: And, you know, this is going

Kimberly Flynn: back, twenty five, thirty years,

Kimberly Flynn: at least in terms of they've

Kimberly Flynn: had, heavy allocations to

Kimberly Flynn: private equity and to real

Kimberly Flynn: estate investments.

Kimberly Flynn: Part of that has to do with an

Kimberly Flynn: institutional investors longer

Kimberly Flynn: time horizon.

Kimberly Flynn: But if you think about it, individual investors who are

Kimberly Flynn: saving for retirement, they also have fairly long time horizons.

Kimberly Flynn: You know, call it twenty to

Kimberly Flynn: thirty years to save for

Kimberly Flynn: retirement.

Kimberly Flynn: But I think your question is really about what has changed.

Kimberly Flynn: And, definitely capital market expectations, as we were talking

Kimberly Flynn: about in terms of what are stocks and bonds going to do for

Kimberly Flynn: me in my portfolio?

Kimberly Flynn: And I think because of concerns

Kimberly Flynn: about potential return

Kimberly Flynn: disappointment, investors have

Kimberly Flynn: looked to private credit and

Kimberly Flynn: they have looked to private

Kimberly Flynn: equity.

Kimberly Flynn: we see a lot of regulatory

Kimberly Flynn: reasons for this shift that's

Kimberly Flynn: really occurred over the last

Kimberly Flynn: ten years or more because, you

Kimberly Flynn: know, everyone has heard, that

Kimberly Flynn: companies are staying private

Kimberly Flynn: longer, largely due to

Kimberly Flynn: regulatory reasons.

Kimberly Flynn: You know, there's a lot of burdens on public companies.

Kimberly Flynn: And so unicorns have been getting bigger.

Kimberly Flynn: And many firms that people want to invest in, they don't have an

Kimberly Flynn: opportunity if those companies are still private.

Kimberly Flynn: So there's investors, both retail and institutional, that

Kimberly Flynn: have been clamoring for access to many of these innovative,

Kimberly Flynn: oftentimes technology driven, investment opportunities in the

Kimberly Flynn: private equity space.

Kimberly Flynn: So if these companies are going

Kimberly Flynn: to remain private longer, the

Kimberly Flynn: only way to participate in the

Kimberly Flynn: early growth, you used to be

Kimberly Flynn: able to buy small cap stocks to

Kimberly Flynn: participate in that kind of high

Kimberly Flynn: growth phase.

Kimberly Flynn: But now you need to get exposure to private equity, which is very

Kimberly Flynn: challenging for individual investors if you don't meet

Kimberly Flynn: suitability requirements, if you don't meet the investment

Kimberly Flynn: minimums, or if you don't have access to some of the leading

Kimberly Flynn: private equity firms.

Kimberly Flynn: the same thing is true in terms of regulatory challenges, which

Kimberly Flynn: has led to, basically the disintermediation of banks.

Kimberly Flynn: Banks are no longer lending to small and medium US businesses

Kimberly Flynn: the way they did ten years ago.

Kimberly Flynn: And so to fill that gap, that

Kimberly Flynn: has been created, companies

Kimberly Flynn: still need to grow their,

Kimberly Flynn: businesses.

Kimberly Flynn: And so the private credit market

Kimberly Flynn: specifically direct lending has

Kimberly Flynn: taken the place of those big

Kimberly Flynn: banks.

Kimberly Flynn: So a lot of reasons why, investors are now participating

Kimberly Flynn: in private credit and private equity, because the returns are

Kimberly Flynn: attractive, in a way that, the need for capital to grow the

Kimberly Flynn: companies, either through equity or debt, has really shifted to

Kimberly Flynn: the private market side

Tanya Suba-Tang: and talking about, you know,

Tanya Suba-Tang: private markets, private credit

Tanya Suba-Tang: sector has been quite a boom

Tanya Suba-Tang: lately, kind of what you're

Tanya Suba-Tang: mentioning.

Tanya Suba-Tang: Looking ahead, which area of

Tanya Suba-Tang: private markets do you believe

Tanya Suba-Tang: will take off the fastest and

Tanya Suba-Tang: what makes you optimistic about

Tanya Suba-Tang: that?

Kimberly Flynn: Well, for much of twenty twenty

Kimberly Flynn: four and twenty twenty five, the

Kimberly Flynn: focus has been on private

Kimberly Flynn: credit.

Kimberly Flynn: I think because we were in a

Kimberly Flynn: higher interest rate

Kimberly Flynn: environment.

Kimberly Flynn: The demand for yield, the demand

Kimberly Flynn: for income has led a lot of

Kimberly Flynn: investors to, not just direct

Kimberly Flynn: lending, but structured credit,

Kimberly Flynn: multi-strategy credit.

Kimberly Flynn: And now, one of the popular categories for investment within

Kimberly Flynn: credit is asset backed lending.

Kimberly Flynn: And I think this is in response to some of the concerns.

Kimberly Flynn: We're starting to see cracks in

Kimberly Flynn: corporate credit with some of

Kimberly Flynn: the issues we've seen with

Kimberly Flynn: Tricolor and First brands this

Kimberly Flynn: fall.

Kimberly Flynn: So, you know, income oriented

Kimberly Flynn: investors are still going to

Kimberly Flynn: need income.

Kimberly Flynn: So asset backed lending, is a

Kimberly Flynn: source of income that is going

Kimberly Flynn: to be diversified from corporate

Kimberly Flynn: credit.

Kimberly Flynn: And that's where we're seeing people turn.

Kimberly Flynn: I think for twenty twenty six

Kimberly Flynn: we're going to see a lot of

Kimberly Flynn: interest again where it's been,

Kimberly Flynn: not the case the past few years,

Kimberly Flynn: but real estate debt,

Kimberly Flynn: infrastructure debt, those are

Kimberly Flynn: other options for income

Kimberly Flynn: oriented investors who are

Kimberly Flynn: looking to diversify sources of

Kimberly Flynn: income, especially important for

Kimberly Flynn: retirees who count on that

Kimberly Flynn: income.

Kimberly Flynn: so I think that real estate debt, there's only a few

Kimberly Flynn: products available in the marketplace, either in a

Kimberly Flynn: Non-traded REIT or in an interval fund wrapper.

Kimberly Flynn: So there's still some white

Kimberly Flynn: space in that market, for fund

Kimberly Flynn: sponsors who are looking to

Kimberly Flynn: bring their private market

Kimberly Flynn: strategies to market, I think

Kimberly Flynn: for, real assets generally,

Kimberly Flynn: because of the negative

Kimberly Flynn: performance of real estate,

Kimberly Flynn: private equity.

Kimberly Flynn: It's been a while since we've seen new product formation.

Kimberly Flynn: and, you know, financial advisers, wealth managers really

Kimberly Flynn: love tangible assets because I think investors can get their

Kimberly Flynn: arms around, an office building or, a data facility.

Kimberly Flynn: And so I think that with the

Kimberly Flynn: tangible nature of

Kimberly Flynn: infrastructure as well, it helps

Kimberly Flynn: to understand sort of the

Kimberly Flynn: investment thesis.

Kimberly Flynn: but in something that's tangible, you can tell the story

Kimberly Flynn: if you're trying to get somebody interested in alternatives for

Kimberly Flynn: the first time.

Kimberly Flynn: It helps with that education process.

Tanya Suba-Tang: And I'm sure everybody wishes they have a magic eight ball.

Tanya Suba-Tang: So I'm going to ask if you had a venture a bold prediction.

Tanya Suba-Tang: Where do you see the total value of private markets heading into

Tanya Suba-Tang: the next few years?

Tanya Suba-Tang: And a follow up with that is,

Tanya Suba-Tang: what do you think will be the

Tanya Suba-Tang: main catalyst behind that

Tanya Suba-Tang: growth?

Kimberly Flynn: Well, I mean, you can slice and

Kimberly Flynn: dice, the wealth management

Kimberly Flynn: market a number of different

Kimberly Flynn: ways.

Kimberly Flynn: If we just look at money in retirement accounts in the US.

Kimberly Flynn: we're talking about a ten to fifteen trillion dollar

Kimberly Flynn: investment opportunity because most retirement accounts have

Kimberly Flynn: zero exposure to alternatives.

Kimberly Flynn: And so, you know, we can all debate whether or not a two

Kimberly Flynn: percent, a five percent, a ten percent allocation to

Kimberly Flynn: alternatives is appropriate.

Kimberly Flynn: But I think, the growth in

Kimberly Flynn: alternative investments, the

Kimberly Flynn: growth we're seeing today in the

Kimberly Flynn: market is about twenty to twenty

Kimberly Flynn: five percent.

Kimberly Flynn: that's the growth in assets, in

Kimberly Flynn: the interval fund market, which

Kimberly Flynn: is one way to access

Kimberly Flynn: alternatives.

Kimberly Flynn: But if you look at McKinsey and Bain Research, it also notes,

Kimberly Flynn: high twenty percent plus growth rates for alternative assets.

Kimberly Flynn: And a lot of that is looking at

Kimberly Flynn: where does, the portfolio, you

Kimberly Flynn: know, it's a, shifting of assets

Kimberly Flynn: from traditional exposures into

Kimberly Flynn: private equity, into private

Kimberly Flynn: credit.

Kimberly Flynn: and I think it's challenging the

Kimberly Flynn: status quo, which is the sixty

Kimberly Flynn: forty.

Kimberly Flynn: And, you know, I think the

Kimberly Flynn: balanced portfolio got thrown

Kimberly Flynn: out the window in twenty twenty

Kimberly Flynn: two, but it really is opening

Kimberly Flynn: the door for a lot of new

Kimberly Flynn: investment opportunity and fund

Kimberly Flynn: formation.

Kimberly Flynn: And the industry right now, is

Kimberly Flynn: very focused on both traditional

Kimberly Flynn: managers and alternative

Kimberly Flynn: managers are trying to move into

Kimberly Flynn: this space because of this

Kimberly Flynn: massive trillion dollar

Kimberly Flynn: opportunity.

Kimberly Flynn: So we're going to see a lot of money move, into this space.

Kimberly Flynn: And with the recent executive order by Trump, there's a big

Kimberly Flynn: industry push also to put alternatives into 401K plans.

Kimberly Flynn: there's some regulatory hair on that.

Kimberly Flynn: but the Department of Labor has been tasked to look at that.

Kimberly Flynn: the SEC is looking at how we can do that because so many

Kimberly Flynn: Americans are retiring short of their investment goal, and

Kimberly Flynn: there's a gap that exists.

Kimberly Flynn: And to the extent that alternatives can help.

Kimberly Flynn: now, there's always risks that come with this.

Kimberly Flynn: But that's what I think.

Kimberly Flynn: industry professionals and, these government officials are

Kimberly Flynn: sort of debating right now is what is the role for

Kimberly Flynn: alternatives going forward.

Kimberly Flynn: And, to the extent that it can be helpful for achieving these

Kimberly Flynn: retirement goals, were encouraged by the incorporation

Kimberly Flynn: of alternatives into both retail and institutional portfolios.

Tanya Suba-Tang: Wow. Well, thank you so much, Kim, for all that insights.

Tanya Suba-Tang: I think it's really exciting times that's happening.

Tanya Suba-Tang: And as you mentioned, you know, these debates that's happening.

Tanya Suba-Tang: I can't wait to see where we land a year from now.

Tanya Suba-Tang: So hopefully I'll have you back

Tanya Suba-Tang: in and you can give us your, you

Tanya Suba-Tang: know, whether you hit it right

Tanya Suba-Tang: on the nose on your prediction

Tanya Suba-Tang: and what else to expect in the

Tanya Suba-Tang: space.

Tanya Suba-Tang: So thank you.

Kimberly Flynn: Thank you very much.

Kimberly Flynn: I'd be happy to be back on and

Kimberly Flynn: be in front of fellow CFA

Kimberly Flynn: Charterholders.

Lindsey Helman: Thank you to this month's guest,

Lindsey Helman: Kimberly Flynn, for joining us

Lindsey Helman: today and breaking down the

Lindsey Helman: latest in alternative and

Lindsey Helman: private markets.

Lindsey Helman: Join us next time for another

Lindsey Helman: Financial Perspectives episode

Lindsey Helman: airing on the last Tuesday of

Lindsey Helman: the month.