Investing Billions - E208: CIO Frank Mihail on Running an $8 Billion Portfolio with 3 People

Episode Date: September 3, 2025

In this episode of How I Invest, I speak with Frank Mihail, CIO of the North Dakota Department of Trust Lands, which manages an $8B sovereign wealth endowment built to fund public schools. Frank shares how his three-person team runs a highly concentrated portfolio with 75% in alternatives, why they prefer evergreen fund structures for liquidity, and how they think about portable alpha, co-investments, and core-satellite strategies. We also discuss the trust’s broader mission: having already distributed $2B to North Dakota schools, with the long-term goal of covering the entire cost of public education.

We're a three-person team all-in, including operations. So keeping a tight book, we have our entire $8 billion portfolio is 40 line items, not over-diversified yet, and we run up concentrated books. So we can still generate significant alpha just from picking a manager because our total portfolio isn't over-diversified yet. So sometimes in our industry, beta is like bad word. The whole goal is to beat the index. But look at beta, just take the approach of, like, put the whole portfolio

in opportunistic risk. And what will happen is like, so those will deliver outsized returns and some of them will deliver negative alpha and then you end up like into the beta because some outperform and some underperform. Plus, what we're trying to do is be more surgical in our approach to alpha.

Give me a sense for where North Dakota land trust stands from an asset level and from maturity of portfolio. So we're actually still in the I guess growth phase as you would call it in terms of there's still a lot of resources in the ground that we project we would be able to extract for the next 30 years so I think a good analogy is any 401k you know when you're 20 years old you're contributing to the to your 401k and then when you retire and you don't have that income you start taking from the 401 case.

Same thing for us. Right now, we're still contributing to the endowment, and then eventually we're going to deplete those resources, and we'll hope to have built a large enough endowment that once we start taking principle, we can still sustain in perpetuity. Total assets, including the land that we own, is about $12 billion. The investable assets are about $8 billion.

Double click a bit on your portfolio construction, How do you go about investing those assets? So we target our strategic asset allocation has a 45% target to private markets. That includes private equity, venture capital, private credit, real estate, and infrastructure. And then we have another 30% to long, short strategies. And that's divided into zero beta and beta one hedge funds. So if you combine that 45 private markets and 30 long short strategies, that's about 75% in alternatives. The remaining 25% of the portfolio is passively indexed.

45% is pretty typical target for an institution. But I think where we're differentiated is even with the 75% to alts, 90% of our book still provides a liquidity option. And another way to say that is it just means that we're not doing as much in closed-end vehicles. So double-click on that. How does 95% of your book provide liquidity? So we use a lot of open-end or evergreen structures that gives us liquidity optionality. So typically, these are roughly you could get liquidity in about five years over 20 quarters? Every asset class is different in private credit.

It's typically my estimate is about a four-year roll-off. to get full redemption. In real estate, you know, well, right now, real estate open-end funds have been in a stressed period where redemption cues are high, so funds haven't been paying out distributions. But it can, so it can vary, really vary depending on when you request it. If it's, you know, good liquidity times, you could get your request out in less than a year. But right now, it's, you know, you know, multiple years to get liquidity. real estate open-end funds. And why do you like these type of evergreen fund structures? We're a three-person team all in, including operations. And so keeping a tight book,

we have our entire $8 billion portfolio is 40 line items. If you look across the institutional platform, you know, there's a lot of institutions that have like 200 plus line item books. And it becomes really operationally intensive to open new. accounts, go through legal and side letter and, you know, send capital calls. And we don't really have as much resources in terms of staff to do all of that. So we try to keep a concentrated book to help with the operational bottleneck. Some institutional investors have told me privately that they're also transitioning from closed-end funds to evergreen funds in order to save on fees for essentially the same exact product.

Do you find any economic benefits to investing to Evergreen funds, or is it just for the liquidity and for the operational ease? I will say, yes, I do see lower fees, but I think it's more like what I've noticed is more of a function of what asset types make sense in an Evergreen structure versus closed end where, and I think real assets, real estate and infrastructure is a good example.

Evergreen structures make sense when you're playing in that lower risk core space. And once you move into the more opportunistic space, it doesn't make as much sense. And I think fees are structured around those core versus opportunistic type of risk assets. One of the most innovative pension funds in the country is really also leaning into these evergreen funds. And their rationale is that on average, only 67% of funds are invested in private equity funds into actual companies, and the rest is not yet called. So on average, over the length of a 10-year fund. So you have this 33% cash drag, set another way, 33% of your money is earning treasuries, and only two-thirds of it is having its intended purpose, which is investing into highly liquid. you know, higher up the risk curve assets like private equity, how much does that factor into

you wanting to be in these evergreen funds? It certainly helps and build the case. I don't know if it was it was the driving decision maker for us, but and I agree, and I can sort of point to some numbers here to help flush that out. So if you use the rule of 72, you'd need to generate 9% in an evergreen vehicle to hit a 2x multiple in 8 years. But if you're parked in cash waiting for capital calls, then you need degenerate closer to like a 15% IRA to hit that same 2x multiple in eight years. And so what this does is it forces allocators in closed end funds up the risk curve into that opportunistic risk to hit that same multiple. Whereas we can stay invested in that lower core risk spectrum and still hit that same multiple over time.

I've been going down this rabbit hole of what benefits do larger LPs actually have over smaller LPs? So smaller, obviously, could be nimble. You don't want to be too small because then you don't have access. But let's say you're a $5, $10 billion LP. You can be more nimble. But also there's benefits that accrue to larger funds. And one of these benefits that accrue to larger LPs, not funds, is the co-invest. So you could actually, you could actually calculate what the advantage is. So roughly on a 25% IRA, it's a 19% net of fees. In other words, that 6% alpha is something that you gain by investing in the co-invest. So it's another way. If you were to invest half of the assets into co-invest, you would get 3% of alpha. So some of these

advantages of investing into specific structures or having specific rights get accrued to the large investor. And then some of these advantages of being a smaller investors, of being able to go lower middle market, being able to have kind of more earlier assets accrues to the smaller investors. But there are significant benefits that also accrued to larger investors as well. I've been thinking about it a lot and having discussions with our consultant around, you know, because I am in, I'm at conferences and conference calls with a lot of the CIOs for these largest pensions in the world. And they're talking a lot about co-invest. and we're not really doing any co-invest. So part of me thinks, like, oh, should we be doing co-invest like them? But I think I got to stay true to who we are and where we are in our life cycle.

The reason co-invest makes sense for some of those largest pensions and institutions is they're so broadly diversified, again, using that like 200 line item plus portfolio. They can take a concentrated risk in a single business to drive alpha and it's not going to really impact their total portfolio performance that much if it goes, let's say if it goes south. We're not over diversified yet and we run up concentrated books so we can still generate significant alpha just from picking a manager because our total portfolio isn't over diversified yet. So we've talked about the tradeoff of co-invest. And for us,

it's you're trading a fee reduction for a concentrated bet and we're not ready to go down the co-invest route because we're not ready to make that concentrated bet on a single company. You're trading off fee reduction for concentration. I think a lot of it is also, if you look at what's a predictor of the best co-invest program, it's the institutions that have really thought about it and that I've thought about it from first principles. Scott Wilson at Wash U, St. Louis, he'll have his team, not only meet with the manager, and look for their most concentrated positions,

they'll also do their underlying diligence on the end asset as well. And then other LPs, you'll see they'll think about the incentives behind co-invest programs, how they could become really important partners to their GPs, so that they do a lot of upfront work so that when a co-invest comes to them, A, they're prepared and they're ready to process it, and B, they understand the incentives that's striving, that managers as well as that managers kind of zone of excellence where they're the best at.

So a lot of these best in class co-invest programs are very much thought out and a lot of them are very active. So it's not something you want to do with one foot. You'd probably have to be staffed up as well. Again, it's pretty tough with the three-person team. So when we were talking about Evergreen Funds, you alluded that it works for some asset classes and not other asset classes. Maybe you could double-click. What asset classes do you think Evergreen funds work for and what asset classes they do not work for? and maybe some asset classes than in the future, you could see evergreen funds going into as well.

Evergreen funds, they work well where returns are more income driven and less growth driven. So I'll give you an example. They work well in private credit and core real estate, but don't work well in venture capital or distressed credit. So let's start with the private credit example. In direct lending and asset back credit, the underlying securities would have like a weighted average life of a four years. So if an investor raises their hand and wants to redeem, the fund manager can set aside some assets, let them self-amortize and fulfill that redemption request without putting stress on the fund. And then think about in core real estate. Usually what defines core real estate is that the assets are stabilized. So, you know, think about a sort of class a piece a real estate that's fully rented, kicking off income. And so you have that income generation

plus if an investor raises their hand and needs liquidity, the manager could list a building for sale. And if it's stabilized Class A, they know they should be able to get full market price for it without, again, putting stress on the fund. So those are examples where the underlying assets make sense in an evergreen structure. Going back to where they don't make sense, in VC or distressed credit, usually it takes a decade for that investment to reach its full potential. And you don't want to disrupt that value accretion process by cutting the time period short. And so I think, yeah, those are good examples of where it works and where it doesn't. What about private equity? What needs to happen for private equity funds to be able to

really proliferate in the evergreen funds? Private equity may almost be there. And we are seeing some evergreen funds come out. Right now, what we're seeing in private equity is there are mature assets that are being rolled into continuation vehicles through GP-led transactions. And these continuation vehicles, the managers will cherry pick what they consider to be the trophy assets that generate predictable cash flows. And so going back to that analogy, if they are mature assets that are sort of kicking off more income and have less growth potential, then maybe those underlying assets

could work in an evergreen vehicle. The other version of the evergreen fund that we're seeing is the interval fund, and those are becoming popularized. They operate a little bit differently where they're buying closed-end funds, and if liquidity needs to be provided, then they would sell those closed-end funds on the secondary market. You know, the trade-off is if you need to generate liquidity during a period of stress, you may have to sell at a discount to provide that liquidity. And I think that's probably one of the biggest sort of risks or fears that investors have going into those types of vehicles.

Speaking of liquidity, you have $8 billion. You have a very specific kind of mandate. you're still have more resources in the ground over the next 30 years. Are you not trying to be a net liquidity provider to other people? In other words, solving their liquidity problems in order to get that illiquidity discount from those investors? We are trying to ramp up our private equity book and we think now is a great time to do it. And secondaries is a great way to access it. We're not going out and like bidding on single deals.

we're hiring managers that'll do that for us in a secondary fund structure. Because you guys have so much AUM and a very small staff, you're not necessarily picking deals, but you're still able to directionally bet on a secular trend. Let's say a bunch of endowments are selling secondary assets. You see that as a theme and you're able to access that through manager. So you're still able to be proactive with your money, even if you're not making specific investments. That's right. And we are actively looking at that space right now.

So I want to double click on what you said earlier, which you have 30% of exposure to long, short, hedge funds. That's a very large exposure. Why are you so bullish on the hedge fund asset class and structure? I'll break it down. We have a 15% target to zero beta hedge funds. Those are your sort of multistrat vehicles, which is our sort of preferred vehicle. We have a 30% target to public equities. half of that is passive and then the other half is long short beta one or they're also called

130 30 strategies or active extension strategies. The way I look at it is you want to give your manager the tools to outperform in all markets and if you're in long only and you go into a bare market like 2022, a lot of the mandates are that they have to stay like they can't go to cash to move out of the way. They have to stay invested. And so they might move from higher vol to lower vols equities, but they're still long. And when you have long, short managers, it actually gives them the tools to make money on that other side in a bare market. And so the goal is that they'll be able to outperform that downside in a year like 2020.

And most of the managers were able to do well in that type of environment. So that's the beta one book. On the zero beta book, the way we view that or the goal is it should be an anchor to the portfolio. So again, 2022 was a great example when equities were down 20%. You know, multistrat hedge funds were delivering positive returns, like even, you know, 10% return positive returns when stocks were down 20%. So we feel like it's a it's a ballast to the portfolio a diversifier. And then the other 15% is just focused on low cost indexing. That's right. Mike Maugh, who I chatted to on Thursday, who used to work for Vanguard's investment team and

marketing team. And I'm not being paid by Vanguard, unfortunately. But one of the things I learned from him that really blew my mind is that in 1981, Vogel, who founded Vanguard, got a special exemption with the SEC in order to advertise and structure their funds such a way. But the key caveat, and that exemption has still held to this day is that every time they get more funds, all of their fees for their funds have to go down. So they have this negative pressure on indexing from the SEC, which I thought was really unique.

And I think it's an untold story, frankly. Yeah, that is pretty interesting. and impressive if they've stayed true to that all these years. So a big part of your strategy is based on this concept of portable alpha. First of all, how would you define portable alpha? Portable alpha is where you separate alpha and beta. In a traditional form of investing, you go out, you hire an active manager, and you task them with beating a benchmark.

When you break up the return components, the bench, benchmark is the beta and then anything above that is the alpha component. And you're hiring one manager to do that. But with portable alpha, you're separating the alpha and beta where you hire or allocate capital to hedge funds to isolate just the alpha component. And then you use derivatives to synthetically replicate the stocker bond beta. To be honest, this is still a concept I'm I'm really trying to grasp. I discuss this with Clifacinus, and what I understand is that the alpha is essentially these modules that you could build a portfolio out of.

So, for example, a famous module back in the day that I'm sure is no longer there, you know, you could sell the Santa Claus. You could sell in December and buy in January. You could somehow isolate that one factor and build it into other types of portfolios. Maybe you could help clarify exactly how you would go practically porting this alpha. into a portfolio. When you're picking hedge funds in a portable alpha program, you really want to make sure they're doing a great job isolating that alpha,

because there's a lot of hedge fund strategies out there where you have this sort of beta creep. There's a lot of hedge fund strategies like Equity Longshort where they might be running at like 0.5 beta. So that wouldn't work well if you're then porting on an additional beta one, on top of that, then you're just running at 1.5 beta. So you really want to make sure you're picking strategies that are shorting out the market and just isolating that alpha component. And there's a lot of different strategies that can do that, whether it's, you know, event-driven, market-neutral, RV.

And so I think, you know, those are the different ways to do it. And there's tools out there that help LPs dissection. that factor exposure and make sure their managers are sort of staying true to that zero beta target. We use a lot of multistrots because we think they do a great job at targeting zero beta. One of the things I'll say about our portfolio is even though I like the philosophy of portable alpha, we're actually not running a true portable alpha program in a proper Portable Alpha Program. Hedge funds are not part of the strategic asset allocation. They, and in our program, they are part of our strategic asset allocation.

And so I think what we're doing, if you entertain the nomenclature, I like to call what we're doing portable beta light. And the reason is the light is because we're also not using as much leverage in a true portable alpha program, you want to be levered one to one. So what I mean by that is, let's say you've got 15% of your capital and hedge funds. You'd also want 15% levered beta. We allocate 15% to hedge funds, but we only have about 2% levered bond beta on. So in a true portable alpha program, You pull out the hedge funds and from the strategic asset allocation, you benchmark them to cash, and then you lever up that same amount of stocker bond beta. And the end goal there is that you still want your money working for you in kind of a one beta environment.

You want the alpha around it, but you also want that money working for you and earning the market. That's right. Yeah. And I guess the best way to put it is, you know, if you do get a drawdown in equity or bond markets, if the absolute return managers are staying true to absolute return, they should still be generating positive returns. And they should also be beating their benchmark of cash. And to double click on that, the reason why cash, is cash is your cost to synthetically finance the beta. So the beta part of it is you're going out and you're buying futures or swaps on the equity or bond market, and that costs you fed fed funds rate plus a spread. And so in order to make up that cost, that's your benchmark for your hedge fund managers. Talk to me about fund of funds. Where do fund of funds fit into your portfolio?

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And the benefit is we get diversified exposures in one line item and that reduces our operational burden for our small team. The other reason that we use fund of funds is as a portfolio construction tool. So for example, in real estate, we use. the NACRIFE ODCE, NACRIFE Odyssey Index, as our benchmark. And we hired a Fund to Funds Manager that can track that index. And then we can build a core satellite approach around that using the investable index. Then we pick satellite strategies that we believe can deliver Alpha.

And so the benefits is it gives us this liquidity sort of home base to rebalance. to our strategic asset allocation targets, but then it also gives us control over how much tracking error we want to take in the real estate portfolio. So if we want, we can go out and hire a high tracking error, opportunistic manager. But if they're taking more tracking error than we want in the total portfolio, then we can just size it appropriately to make sure we're honing in on the tracking error we want. What areas are you looking at to potentially invest into fund of funds that you're not investing into today. Actually, we're in talks right now with a private infrastructure manager who can help us

replicate what we did in the real estate book, which is build that course satellite portfolio using an investable index. And actually, until now, an investable index did not exist in private infrastructure, but Wilshire just announced the launch of the FT, Welsher Private Markets, Infrastructure Index just last month. And it's the first and only investable private infrastructure index. And so, yeah, we're looking to build that same core satellite approach around that index. And why would you look to replicate that index versus investing in that index?

What are you trying to achieve with your exposure? Yeah, the goal would be that sort of same idea, which is with this core satellite approach, you basically buy the beta, buy the index as your home base. and it can, so it can help provide liquidity. And then you can go out and invest in, take more risk and invest in, you know, whether that's closing funds, data centers, secondaries, co-invest, and have those satellites built around that core beta. And then you can always use that core beta as your liquidity home base.

So maybe double click on an example. So let's say you were to put in five, $500 million in the strategy, are you saying that half of that would go into an index that has liquidity and half of it would be trying to beat that index? That's right, exactly. And then you start by investing in the index. It's almost like you're trying to find alpha in the public markets. You invest your money in the S&P 500, so it's not just sitting around.

And then over time, you try to find the alpha in the companies you try to find the stock that will outperform the rest of the market. Yeah, that's right. And actually, going back to how I was explaining. the structure of our public equity book, we're doing the same thing there where we've got 50% of it is just passively indexed with daily liquidity. And then the other half is in these long, short, active extension strategies. So we've sort of built that same model there as well. So for investor that I would want to replicate this, did I phrase it the right way that you have

your money in default as an index and you start to basically sell as you invest into non-index assets? Is that kind of how you operationalize that? Yeah, that's right. And then, you know, if like if you're investing in closed-end vehicles for your alpha satellites, as they wind down and pay distributions, what would happen is your, let's say, your real estate or infrastructure allocation, if that money's going into your cash bucket, your allocation is coming down and you'll be underweight relative to your target. And so you can take those distributions and put it back into that beta home base to make sure you're sort of balanced. getting balanced to your targets. I love it. It sounds complex, but it's incredibly simple and intuitive. And what I love about it is, to quote Warren Buffett, the best, the number one most important factor on investment is the opportunity cost. So by putting in an index, you don't feel this need to distribute and you don't feel this compulsion to invest in a close-end fund. So you could sit around and wait for your shots while you're still earning the beta in that exposure. Also,

you're never underweight or overweight an asset class, which allows you to kind of have an all-weather approach, whether the market's going up or down. So it's an anti-fragile portfolio construction. Yeah, that's right. And, you know, like sometimes in our industry, beta is like a bad word, you know, because the whole goal is to beat the index. But I look at beta as our friend and a tool. There's a behavioral finance aspect to this in that investing is not something that should ever be done under duress, especially into highly illiquid investments. And you should always feel like, at a minimum, I'm getting the beta. And you should almost invest from a form of abundance versus scarcity.

I know those are really like woo-woo terms. But you should never be pressured to invest. I think that leads to a lot more errors, especially in illiquid instruments, than most people would probably admit. Some allocators take the approach of like, you know, let's put the whole portfolio in opportunistic risk and what will happen is like some of those will deliver outside will deliver outsized returns and some of them will deliver negative alpha and then you end up like averaging to the beta because some outperform and some underperform for us what we're

trying to do is be more surgical in our approach to alpha where you know if I'm trying to target like 50 50 basis points of alpha at the total portfolio level by investing in the beta, I can really, like, tighten that tracking error and then just pick the managers who I think, my alpha managers, who I think can, like, really just consistently outperform, like, not trying to swing for the fences, but if you can consistently just put up like 50, 100 bips over the benchmark, then that will roll up to our top line total portfolio alpha. There's this anti-fragility to this model, which is probably underappreciated in that it just goes back to behavioral finance. If you have these huge fluctuations in your portfolio, in theory,

an AI might generate an extra 100 basis points of alpha, but behaviorally, if you sell out to just a strong time and you can't keep this portfolio for 10 years, the real loss is the compounding of the beta with maybe a little alpha. It's not that marginal alpha that you could have theoretically gotten that you never would have actually gotten in the market. I think people fall for this kind of like ideal portfolio fallacy. Same thing with crypto. That's why a lot of crypto investors, you know, I had this, a CIO of Bitwise, and they found behaviorally that if you have more than 5% of your portfolio in Bitcoin,

you sell at just the wrong time. So there's a behavioral aspect, whether or not you believe in Bitcoin or not, there's a behavioral aspect to diversification that's underappreciated unless you have those battle scars from kind of selling at the wrong time. unless you have really high self-awareness about yourself and your true risk tolerance. Selling at the wrong time, one point I wanted to make on the going back to the hedge fund conversation is I feel like a lot of ICs out there sell hedge funds at the wrong time because usually hedge funds will get a bad wrap in times like today where, you know, you've got two years of a bull market. where equities are putting up double-digit returns, and then, you know, boards are looking at their hedge fund book, and they're like either, you know, if you're looking at directional strategies like

CTAs that are down double digits, they're like, well, why are we paying all these fees and they can't even keep up, you know, they're losing money in a bull market, let's get rid of them, or even in the sort of non-directional strategies, which, you know, are usually putting a lower volatility, modest, you know, five percent returns and can't keep up with the double-digit returns of equities. They're saying, hey, we're paying all these fees and they're underperforming, you know, but if you think about what was the reason you hired the hedge funds in the first place, it was not to ever keep up with the stock market. It was to mitigate during the crisis periods. And a lot of boards will fire the hedge funds right after like a two-year bull run,

which is precisely the time you want to keep them because usually, you know, after a two-year, your bull wrong is when the crisis period follows. And that's when you want to have hedge funds in your book. There's this highly underappreciated part of investing, which is rooting your thesis. So the way that I think about it is the more rooted your thesis, the more it will weather the storm of volatility. So the joke is like only 50% of a trade is what stock should I buy. It's really, when should I sell it?

Because you have to have a fundamental thesis. And someone might say, well, just tell me what to buy. Who cares about the reason? The reason you care about the reason is there's a lot of noise in the market. If you don't have a fundamental thesis, yes, you might buy Bitcoin at $100, but you're going to sell it at 140 when it goes down from 160 because you don't understand the fundamental thesis. And it's one of these things that if people spent more time on the front end,

they may still make the same decision, but their conviction will be more rooted, and they'll avoid these behavioral finance traps of how people lose their returns over decades. That's the reason the whole strategic asset allocation model has been built around institutions is to avoid the tactical decision making on the part of investment staff. As long as you're sticking, your job is just stick to your targets and rebalance to your targets and you're not making calls on when to buy and when to sell. On a previous podcast, top investor told me that the number one thing you could do in a crisis is to cancel

your next IC or the number one thing you can do in down market is just to cancel your IC that's the degree of freedom you have in order to preserve your returns because as soon as you get to the IC

the game is over and you sell your losing position at the wrong time. So it's obviously a bit facetious but there's a granular truth there where sometimes the best thing to do is to do nothing and that's extremely difficult

especially when you have to build consensus around a dozen people. You tend to revert this kind of least common denominator. Yeah, that's right. And I guess another way to put it is like sometimes like doing nothing sometimes means sitting in cash and cash is also a choice. I don't want to get you in trouble. But one of the things that I'm really trying to talk about is this golden calf of liquidity and I call it the virtue of illiquidity.

My friend just reminded me at my bachelor trip. And he's like, you know, that was a great idea. About a decade ago, I wanted to create a Bitcoin fund that would, no matter what, would be illiquid, a 10 and 20 year fund is more like a thought experiment. But the one benefit would be that if you own the Bitcoin yourself, you're able to sell it. But if somebody else owns it, the feature is actually the illiquity of the asset. And obviously, controversial for many reasons. But there is this value in private equity and venture capital in some of these classes,

asset classes where the illiquidity is not the only feature but is a feature of asset class one way to think about it is which is interesting is like if you're willing to stomach the volatility um you could get access to crypto beta for free right like if you if an institution is sophisticated enough um to understand how to um invest in native tokens directly i mean that's it's pretty much free or, you know, you would probably hire a custody bank and whatever they charge. But if you can't stomach the volatility and you prefer the private markets approach, you pay two and 20 for it. And sometimes that is the best approach. And I would argue for a lot of institutional investors, that is the right thing.

There's a philosophical question, which is if a fund's in an illiquid vehicle and it goes up and down value, did it actually go up and down value if it hasn't been a quarter? In other words, there's this willful. ignorance that I would argue is as much of an asset and not seeing your your assets marked up on a daily basis. Yeah, that's right. What's that other quote? Like if a tree falls and nobody hears it.

Did it make some noise? Did it actually fall? Yeah. So going from trees falling, you like to seed funds, which is unusual for an asset allocator of your size. Why do you like to seed funds? Well, usually there's a tradeoff where you can get some economic. benefits, whether that's a revenue share or a fee reduction.

And, yeah, we've seeded a couple products. Usually we're doing it with blue chip firms that we already know that are expanding their product lineup and offering favorable economics in return. It's a little easier for us to underwrite those firms if we've already done like firm ODD with them. We haven't yet seated like emerging managers that are starting a new firm from scratch. That's a little bit harder for us to underwrite. I know a lot of,

there's a lot of allocators that do do that and have programs around that, but we haven't really entered that space yet. I was just sitting with a 10 billion plus kind of public fund. And one of the things that they do is they pilot some of their strategies within their core fund, and then once they build a track record, they spin it out into its own strategy. Is that what you're talking about? We haven't done it in that method yet. These are usually like big platform firms where we might have a private credit relationship

with them, and they're expanding to private equity or vice versa. And so that's, I think, a little bit different from what you described. So, as you mentioned earlier, you have a staff of three and you really rely on your partnership with RVK, which is a consultant. Tell me about your relationship with RVK and how do they practically help you on the day-to-day basis. Yeah, we see RVK as an extension of our team. They help us with capital market assumptions that are an input to our strategic asset allocation modeling. They help us with manager monitoring, manager due diligence. When we make new fund investment recommendation to our board,

they're helping out with all of that on-site due diligence and writing up investment memos. So we have a really close and collaborative relationship with RVK. And is it bidirectional in that you go to them and you say, we're looking for this type of manager, they give you some managers, but also somebody might come to you and you send them, over to them and talk to about kind of the sourcing component.

Yeah, that's exactly right. And I can sort of point to specific areas where there's examples. Like my background is I came from New Mexico para public pension where I covered hedge funds. So when I came over to North Dakota, I was pretty well versed in hedge funds. And I had brought some ideas to RVK and sort of picked those managers. first and ask them the underwrite. Whereas I wasn't as well versed in private credit. And so I was leaning more on RVK to say, hey, like, where do I start? Help me filter the universe. You know, there's so many private credit managers out there, who are your top picks. And so, yeah,

exactly. It sort of, the funnel could start from them or it could start from me. A little bit of an odd question, but how many managers visit you in Bismarck, North Dakota, every single year? Yeah, we get, you know, we usually get like one visit a month on average. As you can imagine, summer months are busier. We might get like, you know, one a week in the summer. But not as many managers are interested in coming out here in January and February. That's when you know you have a real relationship when they're coming out in midwinter.

What would you like our listeners to know about you, about North Dakota Land Trust, or anything else you like to share. Just to sort of highlight North Dakota Trustlands, over the last decade, we've distributed more than $2 billion to North Dakota public schools. This year, we're scheduled to distribute $290 million. And our fund covers about a quarter of the cost of public education, which helps reduce the tax burden on local property taxpayers. And that quarter that we make up has grown over time.

And hopefully our goal in the long run is to be able to grow that to 100% and cover the entire cost of public education. I think a lot of times it's lost. You have these large numbers. You're lost on the impact that this money actually has on here, education and state residents. So I appreciate you highlighting that. And I appreciate you jumping on the podcast and sharing your wisdom.

Looking forward, I don't promise January or February, but looking forward to coming to. to Vismarck and continue the conversation. Yeah, likewise. Thanks, David. It's been great. Thanks for having me on. Thanks, Frank. Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend.

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