CAPITAL ALLOCATORS – Inside the Institutional Investment Industry
Host: Ted Seides
Episode: [REPLAY] Ed Grefenstette – Bold Allocations at The Dietrich Foundation (EP.437)
Date: February 23, 2026

Episode Overview

In this episode, Ted Seides sits down with Ed Grefenstette, Chief Investment Officer of The Dietrich Foundation. The discussion dives into the unique and bold investment strategy the foundation has executed under Ed’s stewardship, heavily emphasizing illiquid assets (venture capital and private equity), the foundation’s governance and history, lessons from Bill Dietrich (founder), and how they manage outsized allocations amid evolving global markets. Ed candidly reflects on mentorship, governance, manager selection, risk, emerging markets, challenges in China, portfolio construction, and succession planning, offering a template for how mission, governance, and conviction can radically shape an institutional portfolio.

Ed’s Journey: From Law to Leading The Dietrich Foundation

• Early Background and Influences
  • Pittsburgh native, one of nine children; influenced by his father, who worked with Henry Hillman—early private equity and venture pioneers ([06:11]).
  • Learned early that investing "is really about people, how people are really at the core of making good decisions in private investing" ([06:54]).
• Career Shift
  • Practiced law, then switched to finance after candid discussions with his wife ([07:39]).
  • Returned to Pittsburgh for an MBA at Carnegie Mellon, kickstarting a second career ([08:19]).
• Meeting Bill Dietrich
  • Met Bill during private equity fundraiser in 2000; Bill declined to invest but began regular lunches, mentoring Ed over seven years ([09:39]).
  • "He slammed the table and says, God damn it, I love it… I'm not going to give you a nickel. ...But I like you. We ought to have lunch." – Bill Dietrich ([10:40]).
• Path to CIO
  • Ed's fund achieved 2x net; entered institutional investing at Carnegie Mellon as CIO, with Bill as mentor and investment chair.
  • Eventually, Bill recruited Ed to be his successor at The Dietrich Foundation ([13:03–14:25]).

The Dietrich Foundation: Philosophy and Governance

Bill Dietrich’s Vision

• Sought to avoid the pitfalls of politicization and mission drift, by predetermining beneficiaries and emphasizing governance ([20:07]).
• “The greatest opportunity for an imperpetuity pool was to be as illiquid as possible. He wanted to push the envelope of asset allocation.” ([20:12])
• Deliberately crafted documents, including a 16-page philosophy and detailed investment thesis ([22:27]).

Unique Governance Model

• No investment committee; explicit delegation of investment authority to Ed as CIO/CEO ([23:28]).
• “The investment committee should always be an odd number, and three is too big.” – Bill Dietrich ([23:28]).
• Trustees’ main job: evaluate CIO for "exceptional long term performance" ([27:19]).
• “You got to give the CIO enough rope, but you might have to hang the guy or gal if they're not doing their job.” – Bill Dietrich ([27:19]).
• Emphasis on documentation and reinforcing long-term thinking (presenting 20-year returns first) to counteract short-term noise ([25:09]).

The Bold Investment Program

Asset Allocation & Illiquids

• 90% of portfolio illiquid (mainly VC and PE); generally 55% venture, remainder split between growth equity and buyout ([30:26], [35:19]).
• “We have not had a direct exposure to the US S&P 500 or any US index since 1997…This is not a portfolio that looks like anyone else’s.” – Ed ([25:09]).
• Private equity viewed as "true equity return" vs public equities, which carry a ‘liquidity discount’ ([28:25]).
• “Liquidity isn’t free and therefore you should be selling your liquidity to the market as much as you can.” – Bill Dietrich ([29:44]).
• Mature portfolio, dollar-weighted average age of partnerships at 7.1 years; distributions have matched outflows to charities ([31:35]).
• Use of a line of credit (~12% of NAV) and modest annual spend (3% of NAV) helps manage liquidity ([33:37]).

Thematic Focus: Innovation & Emerging Markets

• Innovation: Core thematic exposure via venture capital, split ~50/50 US and non-US, emphasizing deep tech, AI, healthcare, and consumer ([35:52]).
• Emerging & Frontier Markets: Active allocations, especially in Asia and Latin America, with direct manager relationships ([35:52], [38:55]).
• “We still think we're in this super cycle [of innovation]. ...AI consumes so much of all of our conversations today, all the way through healthcare to consumer.” – Ed ([35:52]).
• On Europe: “Europe is the largest open air museum in the history of man...I'd rather live in the US, vacation in Europe and invest in Asia.” – Bill Dietrich ([35:52]).

China: Insight, Runup, and Reassessment

• Early China allocation started in 2006: “Now's the time. ...I'm going into China hard on privates.” – Bill Dietrich ([40:59]).
• Priority on local, on-the-ground teams, not parachuting US managers ([40:59]).
• Peaked at 38% of portfolio (2020), now ~20% due to liquidity events and portfolio rebalancing ([43:15]).
• “Our portfolio in China over the last 10 years produced 160 million of excess liquidity. ...Do pipes really work to get the money back? Yes.” ([43:18]).
• Current stance is significantly more cautious; pencils down on new China allocations due to geopolitics and unpredictability since 2022 ([44:35]).
• “You can't shoot moose from the lodge...you gotta get mud on your boots.” – Bill Dietrich, on direct diligence ([44:35]).

Manager Selection: People, Authenticity, and Due Diligence

• Intensive sourcing: “We meet with 300 managers plus a year.” ([35:52], [46:54]).
• Emphasis on people: “It starts entirely with integrity. It has to be a situation where you're 100% comfortable and happy to be partnering with the people involved. If there's any issues around that, that's a non starter.” ([50:40]).
• Unique manager gathering: Dietrich Private Equity Invitational ("a good amount of gossip goes on about GPs") ([46:54]).
• On manager interview questions:
  • "Assume you raise the $300M you're targeting…what will have been the most likely cause [if we’re disappointed]?" ([52:56])
  • Red flags: Managers refusing to answer this question show a lack of necessary self-awareness.

Portfolio Construction, Co-Investments, and Fees

• Commitment sizing biased toward equal weighting—curb conviction bias ([57:21]).
• “Only so much beachfront property in the Dietrich portfolio. So it's either hell yes or no.” ([57:21]).
• Skeptical on co-investments and the adverse selection risk ([58:18]).
  • “If we get a call from one of our GPs, we always ask, we know we're charming, but why are they really calling us?” ([58:18]).
  • “If they're doing a better job than their GPs, they should bring their GPs in and give them some instruction.” ([59:27]).
• Fee discipline: Refuses to take on funds requiring unreasonable gross returns to net acceptable LP results ([62:44]).

Navigating Challenges: Performance, Liquidity, and Communication

• Outperformance over long time horizons: "Our returns are number one for the trailing 10, 15 and 20 years." ([27:19]).
• Last few years: S&P outperformance poses a “fortitude risk.”
  • “This is where the fortitude risk comes out and is front and center.” ([27:19])
• Framing cycles for trustees: "Every decade there’s a ‘new normal’—energy in the 70s, Japan in the 80s, tech in the 90s—the S&P’s having its day now." ([66:07])
• On innovation and the “Mag 7”:
  • "No question they're driving a lot of innovation. The question is at what price can you access that?" ([68:33])
  • Sees more value going forward in verticals built on AI commoditization, not just the platform giants.

Succession and The Future

• Ed aims to stay until 70 (currently 58), but emphasizes the importance of succession planning, board alignment, and maintaining the drive and rigor Bill demanded ([69:43–70:29]).
  • “Your biggest job is going to be finding your successor.” – Bill Dietrich ([69:43])
• Next chapters: More time thinking about succession, portfolio evolution, and grandchildren ([75:48]).

Notable Quotes & Memorable Moments

• “Boldness is necessary for outperformance. Undoubtedly that is true. ...You need to be able to have the flexibility and the latitude to build something that doesn't look like everyone else.” – Bill Dietrich ([23:28])
• “Liquidity isn't free and therefore you should be selling your liquidity to the market as much as you can.” – Bill Dietrich ([29:44])
• On portfolio construction: “There’s only so much beachfront property in the Dietrich portfolio. So it’s either hell yes or no.” – Ed ([57:21])
• “The Market Timers Hall of Fame is empty.” – Bill Dietrich ([35:52])
• On China research: “You can’t shoot moose from the lodge, you gotta get mud on your boots.” – Bill Dietrich ([44:35])
• “If you meet one foundation, you've met one foundation.” – Ed ([61:17])
• “I think it’s a time for don’t just do something, sit there. That’s probably the best advice right now with respect to China.” – Ed ([44:35])
• "I can't understand how [my granddaughter] can eat so many popsicles...that's a personal mystery of mine." – Ed ([74:46])
• On succession: “He thought most foundations were sleepy. He wanted more of a Dietrich Industries sense of urgency, because he always said, hey, the only reason why we succeeded is we were always three bad quarters away from bankruptcy.” – Bill Dietrich ([70:29])

Key Timestamps

• Ed's early influences and career pivot: [05:42]–[08:51]
• First meeting with Bill Dietrich: [09:39]–[10:40]
• Path to CIO/role at CMU: [13:03]–[14:25]
• Bill Dietrich’s background and philosophy: [15:39]–[23:28]
• Dietrich Foundation governance structure: [23:28]–[27:19]
• Investment strategy, asset allocation: [28:25]–[31:24]
• Liquidity management and spending policy: [31:35]–[34:41]
• Portfolio construction, venture & private equity breakdown: [35:19]–[35:46]
• Thematic approach, innovation & emerging markets: [35:52]–[38:39]
• China investment history: [40:59]–[44:35]
• Manager selection process: [46:54]–[52:46]
• Portfolio construction and co-invest pitfalls: [57:21]–[59:27]
• Market cycles and S&P 500 context: [66:07]–[68:33]
• Succession planning: [69:40]–[71:16]
• Exciting future areas (defense, India): [71:20]
• Notable closing questions: [72:59]–[75:48]

Final Thoughts

Ed’s stewardship at The Dietrich Foundation demonstrates the profound impact that strong governance, unwavering mission clarity, and bold, differentiated conviction can have on institutional portfolios. The conversation is a masterclass in aligning structure and philosophy for long-term excellence—one that “opens your aperture to what's possible in an institutional portfolio with the right goals, structure and governance in place” ([Initial Episode Introduction]).