Episode #61. Democratizing Alternative Investments Through Innovation, Liquidity, and Design: A Conversation with Kim Flynn

The term alternative investments refers to investment opportunities that the financial regulators want to preserve for financial elites and protect from the average “retail investor” like you and me. They’re investments like venture capital, private equity, and hedge funds. They’re too sophisticated for individuals who are not “accredited”. These potentially high-yielding investments must be fenced off from broad accessibility. Too risky for the plebes.

But, despite the regulators, financial markets are evolving to make alternative investments more accessible, liquid, and tailored to individual investors. How do you design products that combine institutional sophistication with retail access—without compromising on structure, performance, or trust? Through customer-centric design: knowing customers well and giving them access to products that meet their needs and give them new choices.

In this episode of the Value Creators Podcast, Hunter Hastings talks with Kim Flynn, President of XA Investments, a pioneer in private market innovation and product design. Kim shares how her firm is breaking down barriers in the investment landscape, from new fund structures to investor education and cutting-edge indexes.

Key insights include:

• Why the term “alternatives” is evolving into a broader concept of private markets.

• How products like interval funds and tender offer funds balance liquidity and long-term investing.

• The importance of demand-focused product design and timing innovation to market needs.

• How educational tools like the XAI Interval Fund Index create transparency and drive adoption.

• Why creativity, empathy, and structured iteration are critical in financial product innovation.

Whether you're an investor looking to access private equity or a product builder seeking to serve new markets, this episode provides a playbook for innovation at the intersection of finance, entrepreneurship, and education.

Learn how venture-mode creativity is coming to financial markets—and how the next generation of investment products will empower everyone.

📚 Resources:

➡️ Learn What They Didn’t Teach You In Business School: The Value Creators Online Business Course

Learn more about XMS Capital

Connect with Kim Flynn on LinkedIn

Connect with Hunter Hastings on LinkedIn

Subscribe to the The Value Creators on Substack

Transcript

(0:00 - 1:22)
In today's podcast we're talking about creativity, innovation, and entrepreneurship in new products in the financial market. It's exciting. This is the Value Creators Podcast, your source for a new kind of business education, escaping from business administration mode and entering dynamic entrepreneurship mode. 

We're guided by entrepreneurial economics, which is the source of all growth and positive change for businesses of all sizes in all markets. We talk to experienced experts in value creation so that there's business learning for you in every episode. Hi, Hunter Hastings here. 

To take us through some of the exciting new innovations in financial products, our guest today is Kim Flynn. She is president at XA Investments. XA Investments is an investment management firm that also designs new products and a consulting firm that helps other firms design new products. 

They're truly innovators in the investment product space. Kim is responsible for all product and business development activities for the firm's proprietary fund platforms and their consulting platform. She's widely recognized as one of the great innovators in financial markets.

(1:23 - 2:25)
She got to XA Investments through Harvard Business School, Morgan Stanley's Investment Banking Division, and Nuveen, but truly she is blazing new trails. Kim, welcome to the Value Creators Podcast. Oh, thank you, Hunter. 

Happy to be here. Well, we have an exciting day because we're going to be talking about creativity and innovation and entrepreneurship and new products in financial markets, which is not always a place where we think that those things are happening. You're president of XA Investments, and you describe the company as an investment manager and a product design consultant. 

So we're going to be interested in finding out what product design is in financial markets. You list some of your focus areas as alternatives, institutional caliber alternatives, you call them, demand-focused product design, education and insights, and innovation. So hopefully we'll cover all of those things, Kim.

(2:25 - 3:16)
But I'd like to start out with alternatives. So I've come across that word, and it's pretty restrictive when you're an investor, or it has been. So what constitutes an alternative investment? Why do we even call it alternative? Yes. 

I think some investors prefer the term private markets, and that encompasses everything from private equity, venture capital to private real estate or private infrastructure. But it also picks up things like hedge fund exposures, farmland. There's a lot of interest right now in private credit, which could include direct lending, asset-backed lending, but also some pretty esoteric investments like aircraft leasing.

(3:18 - 8:26)
And so interesting sources of income and additional return that investors are not largely getting from public equity or from the corporate credit markets that are largely public. So who christened it alternatives? Is that regulators who are trying to separate it into a different pile, or is it the big institutional traders who don't want us in those private markets? Who called it alternatives? I don't think it was the investors, if you will, maybe media, maybe some of the larger asset managers. I think they were trying to give a label to the other, that other part of your portfolio. 

And lately, I think there's been more focus on you know, with 60-40 equity debt allocation, you know, falling apart in 2022. In the last three years, we've seen a lot of innovation trying to take a look at that model portfolio and figure out what's optimal. And so adding private market exposure, just as endowments or institutional investors have long done, I think the label alternatives was convenient. 

But I remember one of my former bosses and mentors at Nuveen Investments, where I spent a large part of my early career here in Chicago, he said, you know, when you speak with financial advisors or you speak with investors, alternative investments doesn't mean anything to them. It's actually a confusing term. So I do think that there are some leading alternative managers, you know, the Blackstones and KKRs of the world that are trying very hard to relabel this other basket of diversifying sources of return, maybe as private markets. 

I guess that encompasses most everything except hedge fund strategies, but hedge funds and some derivative based hedged equity strategies have actually been performing quite well in recent years. But I would put those in the other bucket. I think other people also will put crypto, for example, cryptocurrency, a lot of interest in that as a diversifying investment to stocks and bonds. 

I don't know where people put gold, but I think that gold is maybe a test case for, does it go in the other basket or is it a substitute for fixed income? But I think that's what the industry is trying to figure out as access becomes more available than it used to be five or 10 years ago. The marketing folks are sure running away with some of the labeling, which may or may not be helpful to the end investor. So that's a great way to describe the situation. 

You're expanding the portfolio possibility space for an investor, but thinking structurally about the markets, a lot of folks listening are entrepreneurs and small and medium sized businesses. Is there a shift in the relationship between those firms and capital markets as well, that there's not only new ways to invest, but there's new sources of investment capital and financial capital and even loans for businesses? Is that part of that movement? It is. Part of it is if you look at what's happening in the US, I think around the world, companies are staying private longer and the IPO market for small and medium sized companies that 20 years ago might've gone public and would become a small cap stock, they prefer managing their business as a private fund or as a private business and not going public. 

So you see that on the equity side. As investors, that means we're missing out on a lot of the growth potential of those businesses when they're at a very accelerated pace of growth. The same thing is happening on the debt side. 

If you look at the other side of the balance sheet with companies, they used to go to their community bank or a larger bank to get a loan, a small business loan. The banks have really stepped away from lending to not just small and medium sized businesses, but larger corporations as well. That gap has been filled by private credit asset managers, direct lenders, firms like Blackstone or HPS. 

They are filling a gap that has been a vacuum that's been created by the banks stepping away. I think that these lenders, I think they argue that they are advantageous to being a partner in the growth of a business. I think it facilitates these companies on the direct lending side to stay private longer.

(8:26 - 10:25)
So as an owner of the business, keeping the business private means you are able to hold on to more of the equity yourself if you're bringing in a lender to do so. I think the capital markets have changed for business owners. I think on the early side of things, it can make it more challenging for investors to tap the capital that they need. 

I think there's still innovation yet to come to help business owners. One way of interpreting all of that is that the private companies can be better companies to invest in. We call it venture mode. 

They're much more focused on creating value and growth. They're less bureaucratic. They cut out waste more efficiently and so on like that. 

Some of the private lenders are better at lending. They're better at covenants and they're better at understanding their clients. Maybe the market is better lenders and better borrowers. 

I think that's what they would argue. If you're an investor in direct lending, you're taking home 9%, 10%, 11% returns. On the flip side, that means the corporation is paying that in terms of their cost of debt. 

I think the interesting thing that we've seen in the last six months is that some of the banks like J.P. Morgan and others that have stepped away from corporate lending are now saying, we can't get the direct lending. We can't get that market too far ahead of what we're doing. It actually is prompting the banks to step back in. 

I think for business owners, that's good. I think for investors, it might bring yields down a bit. It'll still be more attractive to invest in private credit than it would be potentially the bank loan market or the high yield market.

(10:25 - 16:00)
But it's interesting because it is lucrative for the lenders, which is the only reason that a firm like J.P. Morgan would step back into the market, even though they had previously stepped away. I've heard Blackstone say also that it's more patient capital because of the way they land and the way they can look at longer term horizons. They're more patient in letting businesses grow and develop and figure out their markets, not just domestically here in the U.S., but also in developing countries. 

Is that a good claim? I think it is true. They have to be more patient. I think in the last three years, all of the private equity sponsors have extended the timetable for a lot of the investments. 

They have to monetize the investment. Partly because capital markets around the world have been closed to new IPOs, they've had to be patient. I think they are patient, they've had to be patient, and they continue to be patient. 

But it's also why we've seen an uptick in continuation funds, an uptick in secondaries, because ultimately people still need liquidity. You can only be patient for so long. I think that's why having healthy capital markets that facilitate the buying and selling of businesses is much needed. 

We need to get back to a healthy, functioning market for that. I say that partly because right now, with some of the turmoil in the U.S. market, I think the concern is that if you're getting a capital call on your next private fund and the prior investment is not giving you the liquidity on the timetable that you had planned, you have trouble managing your portfolio and deploying on schedule. I think there's challenges with that. 

There's only so long you can hold on to investment. It's also a reason why we're seeing private equity funds take out other private equity investments. In some ways, they're helping each other out to provide that liquidity. 

Companies that were sold to private equity are now being resold to a second private equity shop. I think part of that has to do with these extended timetables. Interesting. 

One of the themes you get, taking that to the extreme, is if startup companies decide that getting to IPO is no longer the goal, there are alternatives to do that, does that mean that the traditional stock markets, the markets of the Dow Jones and the S&P 500 and so on like that, go away and they're replaced by private markets or alternatives? I don't think they go away, but the composition of the S&P 500, I think people start to question because it's missing a large part, a growing part of the market. In the last year, we've actually seen a number of unicorn indexes. OpenVC is an index provider that created an index around this. 

There's now two or three. Morningstar here in Chicago also announced a unicorn index. Whether or not those indexes are investable is a real question, but if you're an employee at a privately held firm, SpaceX or XAI, one of Elon Musk's portfolio of funds, and you need to buy a house or you're sending your daughter to college, you need liquidity too. 

There's now a gray share market for employee-granted shares in some of these unicorn companies. It echoes back to what we were talking about. Ultimately, you can wait so long, but there needs to be a liquidity event. 

I think that the rise of some of these unicorn indexes are interesting because clearly there's a ton of demand by investors to get access to some of these private companies that have now grown so large. I think that some of the capital flows are going to move to more innovative product structures who are trying to provide access to an earlier stage, but it probably won't displace the S&P 500. I'd always like to push these things to the extreme, but you're right. 

There's going to be big changes. One of the ways you express that, Kim, is you talk about the democratization of alternative investments. Should I interpret that to mean that venture capital and private capital become an investment channel for everyone? And if so, how will I access it? Yes. 

Access is really the key. If you think about the way an endowment invests with upwards of 50% exposure to private real estate, private equity, venture capital, they have the benefit of very long time horizon. Individual investors don't necessarily have the same lengthy time horizon, but maybe they have 20 years to save for retirement.

(16:01 - 18:57)
Individual investors in the U.S., the challenge for saving for retirement is really with 401ks, it's largely on the shoulders of individual investors. They do need access to the same type of sophisticated products. Alternative investments is one area where in most 401ks in America, it's stocks, bonds, ETFs, mutual funds, primarily publicly traded investment products. 

And if the growth is happening in the private markets and companies are staying private longer, it underscores why venture capital investments or private equity, if made investable. So we're seeing a lot of in the U.S. SEC registered products. There's a sister fund structure to the mutual fund. 

It happens to be called an interval fund. And that's what houses private equity venture capital in the market today. And because it's an SEC registered product, it does open up access to individual investors in a way that five, 10 years ago, people did not have access. 

Yeah. Let's talk about interval funds, but I just want to make the remark as I tried to hold alternative investments in a 401k and they're really hard to get custodied because the JP Morgans and the Morgan Stanleys won't provide you the custody. You've got to go somewhere else. 

You need an alternative custodian. Yes. I think a lot of investors have had challenges with private fund investments in the past because of custody issues, as you say. 

Sometimes they don't show up on your monthly statement. You don't have liquidity, maybe you're uncertain evaluation. So that's a lot. 

The industry is looking to address a lot of those challenges because private fund investing is a great way to get access, but not everybody meets the minimum investments. Not everyone wants a K-1 tax form, which comes late. It might be a pain to put your taxes together. 

And so there's definitely a stratification right now. And every leading alternative manager, Blackstone and KKR and Apollo and Ares, now they all happen to be publicly traded alternative investment managers. So they also have the capital to pursue it with very large sales and marketing teams. 

And they're doing a ton in the way of education. And they have full product suites and they're going as far down market to try to reach the smallest investors. And they're doing it with a number of different product types.

(18:57 - 22:53)
And we don't necessarily need to get into that, but they're meant to fit the asset class and be structured in a way that makes it easier for people. And the big push right now is to do it in SEC registered structures. So shareholders have more protections. 

They get their 1099 and not a K-1. And so that's what the industry is driving hard to do, is to open up access further because you're only touching the tops of the waves with private funds, because it really cuts out a lot of investors who might be interested, but don't meet those minimums. We're delighted to announce the Value Creators online course. 

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Master these lessons and you'll master the most important skill in business, value creation. Go to the valuecreators.com and click the course link. Well, let's go into products. 

Kim, you've mentioned one and it's highlighted on your website quite a lot, the interval funds. I didn't even know what an interval fund is, so let's explain it. Sure. 

So an interval, it speaks to the liquidity window. So if you're investing in private equity and the fund itself is a continuously offered or evergreen fund, the question would be, if you invest today, when are you going to get your money back? In an evergreen product, they need to offer some sort of liquidity window so that when you're ready to sell, maybe in three years' time or five years' time, appropriately, you should have a longer investment horizon. You don't want to go into a product like a private equity fund and then pull your money out in six months' time. 

But nonetheless, you need to know how and when can you get liquidity. So interval is speaking to that interval of liquidity for an evergreen type product. Most of the market for interval funds offers quarterly liquidity, but it is limited to 5% of the assets of the fund. 

So it's a liquidity valve that opens up once a quarter so people who want to exit can exit. And everyone's got different time horizons. Everyone has different life events when they might need money. 

So the thought is it's a difference. It's potentially an improvement over a 10-year term drawdown private fund where if you put your money in, you're not going to get it back till the end of that term. In an evergreen product, you have a little bit more control and it might suit some of your preferences for liquidity relative to holding a portfolio of private funds that typically have like a 10 or 12-year term.

(22:53 - 23:45)
And so the interval fund is a type of SEC registered. You have to go get approval from the SEC to build this type of product. And it shares some of the rules and regulations of U.S. mutual funds, which are meant to protect shareholders. 

So things like an independent fund board that's there protecting shareholders. That's a good example. Obviously, a mutual fund provides daily liquidity. 

That's not what an interval fund does. It typically is quarterly, but there's also some variety in terms of depending on the manager and the asset class, you could see something like semi-annual liquidity, something even less liquid. Or can they allow for special applications for investors? Hey, I need liquidity all of a sudden.

(23:45 - 24:03)
Can I make an application or not? They don't do that. I think there's been some discussion as to whether or not in the real estate industry, there's something called a death put. So if a financial advisor has a client who passes away, they're allowed to put it back to the fund at any moment.

(24:03 - 24:17)
That right now doesn't exist for the interval fund market. It's just the regular quarterly window. And so that's a trade-off that you'd have to be willing to accept by going into a fund.

(24:17 - 24:48)
And so if the fund is in a normal sort of environment and you want liquidity, but nobody else does, you're going to get your full redemption of your shares in the fund. If it's a period like April of 2020 or 10 days ago, and it happened to be the quarterly window for liquidity, you might see a bigger demand for liquidity. And so you may not get all of your shares out at once.

(24:48 - 27:56)
And I think the question is, you are subject to proration. And so when funds like real estate funds in 2023, 2024, many of them were facing calls for liquidity. People wanted to diversify away from private real estate. 

And so many of those funds were in proration, which meant investors trying to get out might've had to wait two or three quarters to get their full investment out. And that's one of the trade-offs for investors to think about before you start considering some of these private market investments. And you can understand why the portfolio manager, if they're investing in private equity, that's a fairly long duration investment. 

They're not going to be able to come up with more than the planned 5% liquidity at a moment's notice. It's a difficult balance for them. Another new product that I wasn't familiar with, Kim, is the tender offer fund. 

What is that? You know, it's very close to an interval fund. It just gets no press attention and nobody talks about it. But it is a similar, it's a semi-liquid evergreen product that holds private market assets. 

So think of private credit or private equity. The only difference between a tender offer fund and an interval fund is the manager and the board have discretion over providing liquidity. So you often see private equity funds structured as tender offer funds because of that long investment duration. 

And they want, like if you found yourself in back in 2008 or 2009, where the market's kind of flatlined for eight quarters, the tender offer fund has the ability to stop providing liquidity. Whereas if you, the interval fund, as we just discussed, is hardwired in advance to provide that liquidity. If it's quarterly for 5%, by mandate, the fund has to deliver that liquidity to shareholders. 

So they have to be ready to do it. With a tender fund, in an extreme circumstance like a 2008 or 2009, they could stop temporarily providing liquidity. Now, this would not be very popular. 

Shareholders would not be very happy. So you have to do a lot of education if you're running a tender offer fund and a lot of communication to help investors understand. But in that situation, a tender offer fund, they would, if they stopped providing liquidity, the argument would be that they're protecting shareholders from taking significant losses. 

They don't want to be selling at the valley and they want to wait. And so that's the difference. It's really the only difference between the interval and the tender fund.

(27:57 - 28:50)
And so it's something to be thoughtful about. And as a fund sponsor of a private equity fund, they feel like it's their duty to design a fund that fits the asset class, and they don't want to find themselves in a place where they're a forced seller. So that's why I'd say the interval fund structure that has that provision for liquidity is a bit more popular because there's still, as people navigate investing in alternatives and private markets, retail investors like to know they're going to have their liquidity. 

And so out of the two structures, the interval fund does tend to be a bit more popular. There's more demand for that product. Now, this marketplace is really large. 

There's now 270 funds. That's a mix of interval and tender fund. It's about half and half.

(28:51 - 29:06)
Well, you mentioned a couple of elements there, Kim, that are important. That's education and communication. Another element I saw in your website was non-listed CEFs, closed-end funds.

(29:06 - 29:39)
And it seemed to me that that's an information innovation, right? You're telling me about stuff that I maybe couldn't find out anywhere else. And there's some education in there too about how to think about those things. So is that part of your formula at XA Investments? You educate and inform? Of course. 

And we're a smaller firm. Our business is about nine years old. And that for us has been an edge in terms of being able to educate not just investors, but other asset managers.

(29:39 - 30:04)
There's a lot of enthusiasm for asset managers to build these types of innovative interval funds or tender offer funds. So we're educating everyone in the ecosystem. We spend a lot of time educating gatekeepers who are just overwhelmed by, frankly, the demand for onboarding of these new products.

(30:04 - 36:03)
And so for us, my career has largely been spent in this, what we call non-listed closed-end funds or non-listed closed-end funds. And so the structural knowledge that we have, these products are a bit complicated to build, that's been able to give us a business edge. And it does allow us to sort of operate at a different level. 

And we partner with a lot of larger asset managers who don't have that structuring expertise. So the educational information you see on our website is sort of educating all audiences about opportunities in private markets. We actually just recently launched an index that we see as a way of educating people on the interval fund market. 

It's called the XAI Interval Fund Index. It's a first of its kind, and it tracks the 77 largest leading interval funds in the market. And that's a largely educational effort. 

We make no revenue on an index like that, but we see ourselves as providing research and providing insights. And that's really important for an area that is really unfamiliar for a lot of people. Yeah, we use the term knowledge flow a lot, Kim, that you're helping knowledge flow to customers and investors in different ways. 

And just the knowledge flow itself is innovative. You've removed barriers from their education, their understanding. So that's fabulous. 

Congratulations for doing that. I like that. I like the knowledge flow term. 

That's good. Good. Please use it. 

We use it a lot. So the next level up is product design. And you talk about demand-focused product design on your site. 

You mentioned it earlier. And that's how we think about innovation in value creation, understanding customers, understanding their needs, designing to those needs. Is that how you think about it in financial markets, too? What is the demand when you say, I'm demand-driven? What do you see in demand? The reality is we talk about the capital markets need to be open. 

And so both buyers and sellers need to be receptive to a new product idea. So a good example would be in the last two years, maybe not today, but in the last two years, if you're structuring a new product, would you build a new real estate private equity fund when competitor funds are trading at pretty big discounts? Probably not. So another example would be, would you build a oil and gas-focused energy investment fund? Probably not. 

Now, in April of 2025, those are two interesting areas because they've been starved of capital for a few years, both energy and capital. Thinking about the new Trump administration and there might be an opportunity for real estate in 2025 or 2026 and energy in a way that there wasn't. And so thinking about the alignment, when we would bring a new product to market, to have success for everyone involved in the endeavor, we talked about the alignment. 

It's the moon and the stars and the planets aligning. And part of that can be predicted. And a lot of it's looking at where is their demand and where do you have a differentiated product? If there's already 10 products of that kind, then the world doesn't need the 11th. 

I actually think the ETF market is a really interesting case study in this very, very thing because in ETF space, there is a significant first mover advantage. So whatever innovative new product that comes to market, the first person to do it. So an example of this would be Janice Henderson out of Denver, Colorado. 

They came to market with a CLO debt, collateralized loan obligation debt ETF, AAA. So it's a high quality CLO debt, but it's significantly higher yielding than treasuries or money markets. That ETF is now $20 billion in AUM and it quickly became the market leader. 

There's plenty of fast followers that have tried, and that's a very niche part of the credit market. There's now 10 or 12 competitors. It's funny, BlackRock actually just announced that three years after Janice had such success that they're launching their own CLO debt AAA ETF. 

And so not to say they won't have some success, but they're not going to raise 20 billion in a single ETF. So it's sort of a laboratory for what makes a great demand driven product. I think that the challenge in the private market space, an ETF isn't a great house or wrapper for a private equity or a private credit, for example, because these assets are fairly illiquid and ETF really demands publicly traded securities.

(36:03 - 41:26)
So that's why we have to be, some of the same sort of principles apply when you're building a private markets fund. There's more complexity. It takes us a little bit longer to get to market. 

Just building a new interval fund that focuses on private equity takes probably six to nine months. So you better be very, very thoughtful about what the demand is going to be a year from now. And you have to monitor your competitors fairly closely. 

You don't necessarily need to be first in the interval fund market. Two or three people can be very successful, but being mindful of differentiation is always important. And so that's what we think about when we think about being ahead of some of the trends. 

And it's advantageous for you. And I think shareholders tend to gravitate to some of those innovative firms. In the case of ETFs, first movers, in the case of private markets firms, it might be actually a different edge. 

It might be the education piece of it, because there's much more to understand before you make that kind of investment. So opportunities for differentiation in terms of that product design and product sale. Yeah. 

So that's fascinating. That's your market structure analysis and where are the gaps and things like that. Do you get to thinking about the investors? We're very big on subjective value and emotional understanding of the market. 

So I can think of myself as an investor wanting to get into, I want to be in those venture capital markets. I understand the higher risk, but I want the higher reward. I'll take the higher risk. 

I've got a need for that participation. What are customers looking for when they're looking for a AAA CLO fund? Yeah, I think in that case it's just attractive yields better or higher than they could get in equivalently rated corporate credit or in a money market fund. And so if you can pick up 150 basis points on short term credit, that's a real advantage. 

And I think it's worth considering some of the complexity, wrapping your arms around what is CLO debt? What's the AAA rating all about? And that's what Japanese investors, institutional investors have long known about the CLO debt market. They're some of the largest investors in the global CLO market in the AAA tranche, right? Because that's a pretty quick math to understand the difference. I think that when you start to consider like there are other products that are lower on the credit rating, you pick up additional risks. 

And so I think you have to kind of think through as an investor. In the US, usually it's with the help of a wealth manager or financial advisor. Maybe that's true in Europe as well. 

But having someone to help you make that decision, there's not as many opportunities in the US for direct to consumer individual investor. Like if you manage your money without a financial advisor, there are still very few opportunities to get private market exposure. I think that'll change. 

That'll change over time. But right now, the focus has really been on helping the financial advisors understand the benefits, the risks. And the reality is, is that the financial advisor sometimes here, many investors are over allocated to large cap public equities. 

And it can be a challenge for them because that's what investors are familiar with and comfortable with, especially with the mag seven. It reminds you of the nifty 50 and the fact that we haven't made much progress on portfolio diversification. And so it can be a challenge for an advisor or a wealth manager to convince investors to diversify away from the mag seven. 

Now, I think maybe they've been taught a valuable lesson in the last 10 days, just given the volatility in those market leading stocks. But the notion of having a diverse portfolio is very hard when certain parts of the portfolio don't perform. And so that, I think, contributes to this large cap bias that we see in client portfolios. 

Let me ask you, if I may, a little bit more about your internal process, Kim, and don't give away any secrets. But when we think about innovation in other markets and products, so we think we might have an R&D department that's always working on that. They go to portfolio projects from high risk to more certain, or we may have teams working on that.

(41:27 - 42:51)
They've often got a process. We have our own that we talk about where you identify the need, and then you map an approach, and then you look at the benefit cost combination. So there are processes to do that, obviously. 

How do you do it at XA Investments? What's your process look like? Well, this is one example where I have been sort of the recipient of a lot of knowledge transfer over the years. I had amazing mentors at Nuveen. Nuveen is a large U.S. asset manager that was acquired by TIA Cref, so one of the largest asset managers in the world now. 

But they had a first class process for product development, and the mentors that I had and the tutelage that I had, my job was very much the same in the 12 years that I was there. And so it allowed me to refine what was a very good process into a process that would work and be applicable at my firm now. So I tell people that the process I use is the process I was taught as a young associate coming out of business school, and it is an excellent, it's an excellent process because it always starts with the customer, and it starts with the market need, and then you go from there.

(42:52 - 47:06)
So in contrast, you don't want the cart leading the horse. You don't want your operations team or your compliance team, for example, dictating what gets done. And there's, you know, meaning you have to listen to their concerns, and you have to address their concerns as part of that process, but they don't get to dictate if there is a market opportunity. 

And part of it is to be, you know, to run a process in a timely way, you have to consider all of those stakeholders. Because I've always built funds that are SEC registered, so we've got to go through the SEC review process, and because of that, you know, they have independent fund boards, so we also have to get fund board approval. And so there are these outside sort of checks and balances that you bear in mind in terms of key milestones for developing a product. 

But I think once you run a process, it's interesting because having used a similar process for 25 years in developing products, I, one of the reasons we have a consulting practice is when I bring young people into the business, and I try to teach them the process, the best way to learn the process is to go through it to build a new fund. But if it takes six to nine months to do it, you know, if you're a new analyst coming out of a top, you know, business program, you might get the chance to launch one, maybe two, if you're doing a two-year rotational program. So part of the reason we have a consulting practice is everybody gets a lot more reps in terms of the, you know, using, you know, thinking through the process and being able to advise other firms at various points of their process. 

We often get called in when people haven't used an effective process, they get stuck, something's broken, and we're called in to fix it. And that's actually really, really fun. Like if you're a problem solver, and you love product design, when people call us and say, hey, this is what we're trying to do, it's very challenging. 

But that's really the art of the product design. And it gives me an opportunity to train the people on my team. Because, you know, it's not much fun spending all day doing research, you want to be part of a live deal, a live transaction. 

And so that's why, you know, the capital markets, we, I spent my beginning part of my career in investment banking, working on capital markets deals. And so there's a lot of fun in building things with a timetable and with a deadline. And so I'm able to, you know, share that knowledge with the group of young people that I have coming up behind me. 

But it does take a while to become an expert in that process. Yeah. Well, you've invented another new product, which is design consulting. 

So I can see that. And the other thing we find in those kinds of processes, and you just emphasized, is iteration counts, doing it again, and again, and again, and again, you get better and better. And that's how you build knowledge. 

So you found a way for young people to iterate. Yes. Yeah. 

And it's exciting when you're working with some of the leading, you know, private credit and private equity managers. It's, you know, so I think that you have to have that kind of sort of enthusiasm and excitement for the work. And I think having more opportunities early on in your career is so important. 

And so it's been, you know, a lot of, for me, you know, product developments is just a ton of fun. And having that process be innate in terms of how you decide what's next and how you move forward is hopefully what I'm sharing with my colleagues. But because I was so lucky to have that process handed on to me, you know, so.

(47:06 - 49:24)
Yeah. Well, let's wrap up there, Kim. The creativity, innovation, and excitement in financial markets and products. 

That's a great, great perspective. I've learned a lot today. I hope everybody listening has. 

We can make a link to xainvestments.com. We'll do that. Is your new index there? Can we find it there? It is. It's on the website. 

So you'll see at the top of the website, it says index, and there's a bunch of information. And you can take a look at sort of the growth of the interval fund market in the US. And, you know, in Europe and in London, there are similar semi-liquid products. 

And so they're just a few years behind the interval fund market. So the LTIF market, the LTAF market in the UK, a lot of growth in semi-liquids trying to give retail investors access around the world. So it's some exciting developments. 

I think there's demand for it, and hopefully the interval fund market will be able to help guide the way for some of these other newer marketplaces. Well, it sounds wonderfully dynamic and exciting and constantly moving, constantly changing. So it's a fun world that you live in, complex world, but sounds like fun. 

It is. It is. Good. 

Well, Kim, thank you very much. I noticed also on your website, you tell people to find you on LinkedIn. So we'll put your LinkedIn up there for XA Investments. 

Anything else you would like to give as a contact point? No, that's terrific. On our website, if you want to sign up for our updates, we do those for free, and you can just get registered and follow us on LinkedIn. We're posting most of our research there. 

So a lot of private markets insights and some of this product design insights as well that we discuss. So thank you, Hunter. Well, thank you, Kim, and congratulations on everything you've achieved, and we'll be monitoring. 

This has been another episode of The Value Creators Podcast. Thanks for listening. You can visit thevaluecreators.com for links and resources related to this episode. 

And check HunterHastings.com for more content on entrepreneurial business management based on value creation principles.