For our next interview, we spoke with a GP Stakes firm that brings a genuinely differentiated lens to the space: Xponance Alts Solutions (“XAlts”), the alternatives investment platform of Xponance—a firm celebrating its 30th anniversary in 2026. XAlts focuses on lower middle market, diverse and women-led GPs, targeting managers with up to $4 billion in AUM, and as Marquette puts it, “building better, not just bigger firms.” Marquette Chester brings deep roots in GP Stakes and alternative asset management; he is joined by A.B. Orr, who contributes a broad experience across GP Stakes and private markets investing.

With that, I'm pleased to share my recent conversation with Marquette Chester and A.B. Orr of XAlts.

From the outside looking in, it may appear that XAlts has only completed one deal, its investment in Copia Group. But Marquette and A.B. offered a broader picture of the portfolio as it stands today. Fund I was designed to build a diversified, lower middle market GP Stakes portfolio, and A.B. said the team has done exactly that across four core asset classes: private equity, private credit, private real estate, and infrastructure. Private equity, specifically buyout, is currently the fund’s largest exposure. Within private credit, the portfolio spans distressed, special situations, and impact credit.

To date, XAlts has completed six deals out of Fund I. For the balance of the fund, the team is targeting sub-strategies not yet represented in the portfolio, for example digital infrastructure and private equity secondaries. Marquette indicated there is room for roughly two more deals, with no expectation that Fund I will exceed 10 names in total. The portfolio has also already seen one exit which has aided the DPI for fund LPs. The Artemis investment was made by a co-investment with SCG. It highlights the benefit of the SCG relationship, in addition to how a GP Stake can potentially make a very good firm more dynamic in what it does, what investors they serve, and in how they reinvest in the team that provides the desired outcomes.

Given the nature of lower middle market GPs, XAlts views growth—and eventually an exit—as a natural part of the investment lifecycle. In fact, that expectation is embedded in how the firm underwrites its deals. When XAlts backs a GP in the lower middle market, the goal is for that capital and partnership to help catalyze the GP’s growth. Once that objective has been achieved, XAlts expects to monetize its position.

That does not mean, however, that XAlts is simply hoping its partner GPs sell themselves to larger firms. A.B. made clear that the preferred exit route is to sell the stake back to the GP’s management team. XAlts considered it as an appropriate way for the GP to reinvest in their people to ensure long-term commitments. The second preference is to sell upward to a mid-market GP Stakes firm. The third path is a full control M&A transaction in which the GP itself is acquired, as was the case for the full realization that we mentioned before.

When asked about typical stake sizes, A.B. elaborated on the firm’s underwriting approach. XAlts does not go into a deal targeting a fixed ownership threshold. Instead, the conversation begins with more fundamental questions: Can we add value here? Should we be partners? What does the GP need the capital for, and how will it be deployed?

Once those questions are answered collaboratively, XAlts builds a 10-year model and back-solves for the equity percentage required to deliver the returns it has targeted for LPs. In practice, that usually lands somewhere between 5% and 20%.

“We want to be large enough to matter,” Marquette said, “but we do not want to get in the way.”

In some earlier XAlts marketing materials, we noticed language around seeding, so we wanted to clarify whether the firm participates in seeding today or is focused strictly on GP Stakes. The answer was clear: today, the emphasis is squarely on GP Stakes.

They drew the distinction bluntly. Traditional seeding often requires a meaningful management fee discount—frequently 25% to 30%—in exchange for an LP commitment. For the Emerging Manager, that can be counterproductive, as those economics are often critical to building the business. XAlts instead aims to provide working capital, relationships, and operational support, structuring each transaction around what the GP actually needs in order to grow.

Stapling LP capital to a GP stake is not the preferred approach. As Marquette put it, “We would much rather get that LP capital to our LPs.” That structure can make sense in certain situations, but it is not the lead strategy. That said, XAlts has had some discussions with GP seeding firms about potential partnerships, given how closely adjacent their target markets are.

One of the more interesting moments in the conversation came when Marquette pushed back on the conventional wisdom that GP growth must always mean AUM growth. Some lower middle market GPs, he noted, do not want to become multi-billion-dollar platforms—and should not have to.

In those cases, XAlts works with managers on alternative ways to strengthen the business: entering new markets, diversifying revenue streams without creating conflicts, and adding operational capabilities externally before deciding whether to build them in-house. The objective is not simply to make a GP bigger, but to make it more competitive and more durable.

That philosophy feels especially relevant in a market where specialist investors are increasingly being favored over generalist, multi-strategy platforms.

Marquette was clear-eyed about why XAlts focuses on diverse and women led GPs: that is where independent research suggests there are outperformance opportunities, and it is where XAlts believes it has the most differentiated sourcing advantage and the strongest relationships. He also acknowledged that the firm would evaluate non-diverse managers but expects a majority of the pipeline to continue skewing toward diverse firms, consistent with Xponance’s 30-year institutional history of backing non-traditional managers.

That focus is also synergistic with the broader Xponance platform, which maintains deep LP relationships with institutions that specifically allocate to emerging and diverse managers. In that sense, the LP network helps inform the GP pipeline, and the GP pipeline reinforces the LP value proposition.

The relationship with Investcorp’s GP Stakes strategy began in 2021 and, by A.B.’s account, has been highly constructive. Investcorp has provided XAlts with access to co-investment opportunities, research, benchmarking, and a valuable perspective on diligence and post-investment value creation as XAlts builds out its own GP Stakes platform.

XAlts has built a database of hundreds of relevant managers, and Investcorp has been helpful in expanding that universe, frequently making introductions as well.

With Fund I closed to new investors since June 2024 and now nearly fully invested, XAlts is beginning to look ahead to its next vehicle. Timing and details remain to be determined, but A.B. suggested there is no expected change to the firm’s asset class focus or overall portfolio construction. Fund II is expected to look broadly similar to Fund I.

XAlts plans to go back to existing Fund I investors first to assess their appetite for a successor fund, as well as for related co-investment opportunities. The next fundraise is expected sometime in 2026, likely in the second half of the year. As for size, Marquette suggested that will ultimately be shaped in consultation with LPs. XAlts will likely be targeting a 3.0x MOIC, and a 20% IRR, with a double-digit yield profile, so fund size will need to be calibrated carefully to support those return objectives.

XAlts is a platform that flies under the radar—partly by design, partly because the lower middle market GP Stakes space doesn't generate the headlines that a Blue Owl or Blackstone deal does. But Marquette Chester and A.B. Orr are building something methodical and differentiated: a closed-end, yield-oriented vehicle anchored to an institutional firm with three decades of relationships in the exact segment of the market they're targeting.

I’m looking forward to keeping an eye on XAlts’ continued growth and success in partnering with the best Emerging Managers.

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