September 16, 2026
Tom Stabile of FundFire writes about the rapid asset growth of semi-liquid alternative investment vehicles across the advisor market and the emerging questions around whether open-end structures should adopt clearer size limits or capacity controls. Kimberly Flynn, president at XA Investments, said scale has become an important issue for the segment as more vehicles grow into multi-billion-dollar funds.
Flynn said, “The conversation about capacity is one as an industry that we’re not having,” adding that “There’s not an honest reckoning of the implication of capacity constraints.” Her comments point to a broader concern that growth without preset caps or fund-closing triggers could affect return potential over time.
The key question, according to Flynn, is whether managers can continue investing with the same discipline as fundraising accelerates. “You can say you don’t have limits, but are you deploying with the same discipline you’ve always used?” she asked, underscoring the importance of aligning asset growth with deal flow, underwriting standards and investment capacity.
Flynn contrasted the semi-liquid market with the private fund marketplace, where managers typically set capacity limits that can be justified to institutional limited partners. In that market, caps are often tied to the amount of deal activity portfolio managers believe can support expected returns over a defined investment period, while open-end semi-liquid vehicles generally accept capital continuously and seek to deploy it quickly.
Setting size limits could also offer managers additional benefits, Flynn said, including a clearer way to demonstrate thoughtful product construction and capacity discipline. She noted that a strategy with constrained capacity may be better positioned to justify performance fees, asking, “We only have so much capacity – why would we not charge performance fees?”
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