Podcast Summary: How I Invest with David Weisburd

Episode 244: Structural Alpha vs. Storytelling with Alan McKnight

Release Date: November 17, 2025
Guest: Alan Younger, CIO, Regions Bank
Host: David Weisburd

Episode Overview

This episode explores the nuances between structural alpha and storytelling in institutional investing. Guest Alan Younger, CIO of Regions Bank (with $70B AUM and $175B under advisement), provides deep insights into allocation decisions, the evolution and democratization of private markets, liquidity management, behavioral biases, the impact of technology, and the realities of generating alpha for large pools of institutional capital.

Key Topics and Insights

1. Advising Different Client Types: Pensions vs. Family Offices

[00:00 – 01:47]

• Similar Approach, Different Liquidity Needs:
  Both pensions and family offices benefit from a disciplined asset allocation approach, but differ sharply in their willingness and capacity to bear illiquidity risk.
• Illiquidity Premium:
  Additional return (“2 to 500 basis points”) can be earned by enduring illiquidity, especially in private equity, but today's market means "you may be locked up for longer."
  Quote:

  “You really have to understand both their willingness and their capacity to bear illiquidity.” (Alan Younger, 00:52)

2. Liquidity Assessment and Behavioral Components

[01:47 – 04:00]

• Framing the Tradeoff:
  People instinctively desire liquidity until they understand the cost (“an extra 3 or 4 percent”), after which most realize they need less than they thought.
• Behavioral Underpinnings:
  Kahneman’s “System 1 vs System 2” decision-making helps explain why some clients are prone to emotional reactions and should avoid illiquids.
  Quote:

  “You have to jettison assets, you get very worried... that’s not the place to have a higher allocation to privates.” (Alan Younger, 03:04)

3. Increasing Access to Private Markets for Smaller Investors

[04:00 – 07:18]

• Democratization via Technology:
  Technology and platforms now allow sub-$100M entities to access private asset classes, previously only available to institutions.
• Distribution Remains Concentrated:
  Despite this, “the top five firms, Apollo, Blackstone, are accounting for 95% of this ‘retail’ capital.”
  Quote:

  “One of the key components to it is technology and the ability to actually access investments… from an administrative perspective, from a platform perspective…” (Alan Younger, 04:18)

• Market Education and Product Fit:
  Managers must specialize their offerings; “not one size fits all.” Both LPs and GPs must focus on appropriate product-market fit.

4. Interval Funds: The New (Semi-)Liquid Alternative

[08:07 – 14:51]

• Definition & Appeal:
  Interval funds bring lower minimums, more transparency, and easier access, but with “gates” limiting real withdrawal if too many redeem at once.

• Liquidity Features and Risks:
  Standard is ~5% of NAV available for redemption quarterly. In normal markets, liquidity functions; in stress, not always.

• Behavioral Virtue of Illiquidity:
  Lockups actually protect investors from their own worst impulses.

  Quote:

  “There’s no free lunch in investing… But at the core… the idea of an interval fund is one that allows a non-institutional investor to access private markets… at lower minimums, with greater transparency and… quite honestly, liquidity features…” (Alan Younger, 08:24)
  “When you are locked up… you can’t do anything about it, and that’s a huge benefit that people don’t talk about as much.” (Alan Younger, 26:55)

5. Use Cases for Liquidity & Managing Market Stress

[14:51 – 16:50]

• Market-Driven vs. Life-Driven Liquidity:
  “Market sentiment liquidity” (tactical reactions) vs. “life happens liquidity” (personal needs, e.g., college, home purchase).
• Planning is Crucial:
  Liquidity buckets should be created in advance for both types of needs. Quote:

  “Most people are comfortable with illiquidity in a normalized market environment... until... they start to question themselves.” (Alan Younger, 13:45)

6. Beta, Alpha, and Behavioral Traps

[16:51 – 22:28]

• Beta First, Move to Alpha:
  Some institutions (e.g., North Dakota Land Trust) use interval funds for beta exposure and transition toward direct manager (alpha) allocations over time.
• Analysis Paralysis and Market Timers:
  The biggest mistake is not getting invested at all; second is trying but selling at the wrong time.
  Quote:

  “You have to get both sides of the trade right… what’s going to prompt you to get back in?” (Alan Younger, 19:43)
  Behavioral tools recommended: Stoicism, process discipline, physical actions (humorously, slamming a finger in a drawer to avoid panic selling, [22:28]).

7. The Virtue of Forced Illiquidity

[26:55 – 29:00]

• Structural alpha isn't just from the asset but from the structure itself:
  Investors locked in for the long-run can outperform those with liquidity. Example:
  Crypto investors' best returns often came from fund investments because “they couldn’t sell.”
• Quote:

  “Illiquidity is virtuous, and the more volatile the asset class, the more virtuous it is.” (Host, 28:01)

8. Structural Alpha Opportunities: Secondaries and Barbell Portfolios

[29:01 – 34:25]

• Secondaries as Structural Alpha:
  Buying at discount from distress or rebalancing sellers is one of the cleanest sources of “structural alpha.”
  Quote:

  “You have a very clear understanding… what those assets are worth… to be able to get some sort of discount… is incredibly valuable.” (Alan Younger, 30:15)

• Institutional Best Practice:
  The “barbell approach” — allocate to either deeply illiquid or fully liquid assets, to be both defensive and opportunistic in market shocks.

9. Direct Managers vs. Interval Funds

[34:26 – 36:03]

• Direct Investments:
  Higher conviction, possibly better terms, and access to co-investments — but require scale, network, and due diligence.
• Interval Funds:
  Good for broader access and liquidity, but fewer co-investment opportunities.

10. Process, Team, and Accountability over Outcomes

[36:05 – 40:26]

• Focus on Process:
  “Process accountability over outcome accountability:” Review and learn from the investment process, not just the results.
• High-performing teams:
  Foster curiosity, accountability, candor, and willingness to fail/learn. Quote:

  “What we want to do is back up… did we do the right work upfront to actually make that allocation… versus really confusing skill and luck.” (Alan Younger, 36:21)

• Federer Analogy:
  Like tennis, win the big points (major investments) more than you lose the small ones.

11. Incentives, Tenure, and Principal-Agent Alignment

[40:26 – 45:16]

• Misalignment in Institutional Investing:
  CIO tenures (6–10 years) far shorter than the fund cycles; reward should be back-ended to foster true long-term focus. Quote:

  “One… is to solve for the principal-agent problem… the best way is to make the principal the agent… tie their compensation to their investment decisions.” (Host, 44:26)

• Alignment via Skin in the Game:
  Even small personal investments from the team can dramatically improve decision quality.

12. Getting Up to Speed in New Industries

[45:56 – 51:46]

• Modern Research and AI:
  Technology and AI accelerate learning, but introduce information overload — the trick is to filter and focus.

  “AI… has really become almost the greatest research assistant of all time.” (Alan Younger, 46:11)

• Manager Interaction:
  Despite more data, real trust and verification (“trust but verify”) and personal relationships remain central, especially in direct private investments.

13. Re-underwriting and Mistakes

[53:18 – 56:47]

• Ongoing Evaluation:
  Every investment/fund should be “re-underwritten” regularly—never assume an earlier good decision or personal trust justifies ongoing allocation.

• Career Advice:
  Seek out unglamorous, challenging roles early—they are more formative and provide deep learning and hidden “alpha.”

  Quote:

  “Take on those projects… that seem the least interesting but are probably the most informative and valuable…” (Alan Younger, 55:31)

14. Final Reflections & Philosophy

[57:23 – 58:30]

• Global Vision, Local Execution:
  Success comes from thoughtful, disciplined processes, deep self-awareness, and a willingness to do the hard, unsexy work.
• Process, Candor, Curiosity:
  The foundation of a winning investment organization.

Notable Quotes & Moments

• “If they can bear more illiquidity, they can clip a much higher return.” (Alan Younger, 00:52)
• “No free lunch in investing.” (Alan Younger, 08:23)
• “The virtue of illiquidity… is that you can’t sell.” (Host, 28:01)
• “I’ve never met a backtest that I didn’t like.” (Alan Younger, 25:01)
• “Process accountability over outcome accountability.” (Alan Younger, 36:21)
• “The best investors… want to have like-minded conversations with their investors.” (Alan Younger, 43:37)
• “You have to get both sides of the trade right.” (Alan Younger, 19:43)
• “Take on… roles that seem the least interesting but are probably the most… valuable.” (Alan Younger, 55:31)
• “Our assets go up and down the elevator every day… our people are the decision makers.” (Alan Younger, 38:21)
• “Trust, but verify.” (Alan Younger, 53:18)

Timestamps for Key Segments

| Topic | Timestamp | |-----------------------------------------------|---------------| | Advising pensions vs. family offices | 00:00–01:47 | | Liquidity framing, Kahneman behavioral lens | 01:47–04:00 | | Tech-enabled democratization (private markets)| 04:00–07:18 | | Interval funds explained | 08:07–10:34 | | Behavioral virtue of illiquidity | 26:55–29:00 | | Secondaries as structural alpha | 29:01–32:55 | | Barbell approach to liquidity | 33:20–34:25 | | Process vs. outcome & team focus | 36:05–40:26 | | Incentives and tenure misalignment | 40:26–45:16 | | Adapting to new asset classes with AI | 45:56–51:46 | | Career advice & uncommon “alpha” | 55:31–56:47 |

Closing Thoughts

Alan Younger advocates for focusing on structure and process over narrative and short-term outcomes—at both the portfolio and organizational level. Whether discussing the tradeoffs between liquidity and premia, or the psychological traps facing both CIOs and retail investors, he repeatedly emphasizes discipline, patience, humility, and ongoing learning.

This episode is a masterclass for allocators, emphasizing that success lies not in chasing performance or stories, but in rigorous self-knowledge, robust design, and a relentless focus on process and alignment.