E208: CIO Frank Mihail on Running an $8 Billion Portfolio with 3 People
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode, Frank from North Dakota Land Trust reveals how a lean three-person team manages an $8 billion portfolio with surgical precision. He breaks down their innovative approach to portfolio construction through concentrated investing (10:58), portable alpha strategies (18:36), and core-satellite structures that maintain liquidity while capturing alpha. Frank demonstrates how strategic partnerships, evergreen fund structures, and disciplined rebalancing can generate significant outperformance—ultimately contributing over $290 million annually to North Dakota's public education system while targeting 100% funding coverage in the long term.
Speakers
David Weild
Host of capital allocators podcast interviewing institutional investors. Based on the conversation flow and detailed questioning about portfolio construction, appears to have extensive background in alternative investments and institutional asset management.
Frank
Chief Investment Officer at North Dakota Land Trust, managing $8 billion in assets with just a 3-person team. Previously worked at New Mexico PERA covering hedge funds, bringing specialized expertise in alternative investments and portable alpha strategies to support North Dakota's public education system.
Key Takeaways
Build a Concentrated Book for Alpha Generation
When you're not over-diversified, you can generate significant alpha just from manager selection. North Dakota's entire $8B portfolio contains only 40 line items, allowing them to avoid "beta creep" and focus on concentrated positions that truly move the needle. (09:31) Large institutions often spread across 200+ line items, diluting their ability to extract meaningful outperformance from individual positions.
Use Evergreen Funds to Eliminate Cash Drag
Traditional closed-end funds leave 33% of your capital earning treasury rates while waiting for capital calls. Using the rule of 72, you need 15% IRR in closed-end structures to achieve what 9% delivers in evergreen vehicles over eight years. (06:49) This forces allocators up the risk curve unnecessarily - stay in lower-risk core investments and still hit your return multiples.
Separate Alpha from Beta Using Portable Alpha
Hire hedge funds to isolate pure alpha generation, then use derivatives to synthetically replicate market beta. This gives managers tools to outperform in all market conditions - when equities dropped 20% in 2022, multi-strat hedge funds delivered positive 10% returns while providing portfolio ballast. (17:17) Benchmark your alpha managers to cash plus the cost of synthetic beta financing.
Deploy Core-Satellite with Index "Home Base"
Invest 50% in liquid, indexed beta as your rebalancing anchor, then build satellite positions around it for alpha generation. When closed-end vehicles distribute capital, reinvest into your index home base to maintain target allocations. (26:59) This prevents being underweight during market opportunities and eliminates the pressure to invest under duress in illiquid instruments.
Root Your Investment Thesis to Weather Volatility
Boards often fire hedge funds after bull markets precisely when crisis protection is most needed. The more rooted your original thesis, the better you'll weather noise and avoid behavioral finance traps. (32:39) Strategic asset allocation exists specifically to prevent tactical decision-making - stick to targets, rebalance mechanically, and sometimes the best action is canceling your next investment committee meeting.
Statistics & Facts
- North Dakota Land Trust manages $12 billion in total assets (including land), with $8 billion in investable assets concentrated in just 40 line items across their entire portfolio. (04:07)
- The fund has distributed more than $2 billion to North Dakota public schools over the last decade, with $290 million scheduled for distribution this year, covering approximately 25% of the state's public education costs. (41:08)
- In closed-end private equity funds, only 67% of committed capital is actually invested in companies on average, with the remaining 33% creating a cash drag that earns treasury rates instead of the intended higher returns. (06:02)
