Podcast Summary: How I Invest with David Weisburd

Episode 208: CIO Frank Mihail on Running an $8 Billion Portfolio with 3 People
Release Date: September 3, 2025

Overview

In this episode, David Weisburd interviews Frank Mihail, CIO of the North Dakota Land Trust, which manages a $12 billion pool (including land) and $8 billion in investable assets—all with a team of just three people. Frank details his team’s approach to portfolio construction, the unique benefits and challenges of running a “tight book,” the push towards evergreen structures, the reality and rationale behind co-investments, the strategic use of hedge funds, and principles for achieving alpha without over-diversification. The conversation also covers operational realities, their relationship with external consultants (RVK), lessons in behavioral finance, and the Trust's broader impact in funding public education in North Dakota.

Key Discussion Points and Insights

1. Operating a Large Portfolio with a Small Team

• Concentration and Simplicity:
  • The $8 billion investable portfolio consists of only 40 line items.
  • Deliberate avoidance of over-diversification, which allows for significant alpha generation through manager selection rather than broad asset dispersal.
  • Operational simplicity is crucial: “We're a three person team all in including operations. So keeping a tight book... it becomes really operationally intensive to open new accounts, go through legal and side letter and…send capital calls. And we don't really have as much resources in terms of staff to do all of that.” (A, 00:00; 04:00)

2. Phase and Mandate of North Dakota Land Trust

• Growth Model Analogy:
  • The Trust is in a contributory ("growth") phase, akin to a young person contributing to a retirement plan. Resources (minerals, agricultural land) will be extracted over the next ~30 years before shifting to distributions for state needs.
  • “Right now we're still contributing to the endowment and then eventually we're going to deplete those resources…” (A, 00:58)
  • Their fund covers a quarter of the state’s public education costs, aiming for full coverage long-term. (A, 42:00)

3. Portfolio Construction

• Allocation Overview:

  • 45% to private markets (private equity, venture capital, private credit, real estate, infrastructure).
  • 30% to long/short hedge funds (split between zero beta and Beta 1).
  • 25% to passive indexing.
  • “If you combine that 45 private markets and 30 long short strategies, that's about 75% in alternatives.” (A, 02:03)

• Liquidity Focus:

  • 90% of the alternative book remains in vehicles with liquidity options, favoring open-end or evergreen structures over closed-end funds.
  • On liquidity: “We use a lot of open end or evergreen structures that gives us liquidity optionality.” (A, 03:06)
  • Real estate open-end funds currently have “redemption queues,” impacting liquidity. (A, 03:19)

Evergreen Fund Structures

• Operational and Economic Case:

  • Evergreen funds simplify operations and, in select asset classes, reduce fees and cash drag.
  • They are especially suitable for asset classes where returns are more income-driven and less appreciation/growth-driven—e.g., private credit and core real estate.
  • Memorable quote: “Evergreen structures make sense when you're, 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.” (A, 05:06)
  • Fee differences are driven more by risk-profile alignment than by structure alone.

• Cash Drag in Closed-End Vehicles:

  • Traditional private equity has ~33% cash drag during the investment period, as not all capital is immediately deployed.
  • “If you use the rule of 72, you'd need to generate 9% in an Evergreen vehicle to hit a 2x multiple in eight years. But if you're parked in cash waiting for capital calls, then you need to generate closer to like a 15% IRR to hit that same 2x multiple in 8 years.” (A, 06:30)

Where Evergreen Funds Work and Don’t Work

• Works Well:
  • Private credit (especially direct lending, asset-backed credit), core real estate.
  • “They work well where returns are more income driven and less growth driven.” (A, 11:13)
• Doesn’t Work Well:
  • Venture capital, distressed credit, and strategies needing a decade+ to realize full value.
• On Private Equity:
  • “Private equity may almost be there…we are seeing some evergreen funds come out right now.” (A, 13:05)
  • Strategies such as continuation vehicles and interval funds are emerging, but secondary/liquidity risks remain.

4. Co-Investment: Large vs. Small LPs

• Advantages and Tradeoffs:
  • Larger LPs can access co-investments, gaining fee advantages and potentially 3% extra alpha if deployed at scale.
  • Drawback for smaller or less diversified portfolios: risk of undue concentration, operational capacity limits.
  • “We're not over diversified yet and we run a concentrated book so we can still generate significant alpha just from picking a manager…So we've, we've talked about the trade off of co invest and for us it's you're trading fee reduction for a concentrated bet and we're not ready to go down the co invest route.” (A, 08:30)
  • Readiness involves not just strategy but staffing: “You probably have to be staffed up as well. Again, it's pretty tough with a three person team.” (A, 10:48)

5. Secular Trends: Using Secondaries for Opportunism

• Building exposure to private equity secondaries:
  • Access achieved not through manager-less direct deals but by hiring specialist managers, leveraging their small team’s bandwidth efficiently.
  • “We're hiring managers that'll, that'll do that for us in a secondary fund.” (A, 14:53)

6. Strategic Role of Hedge Funds

• Significant Allocation for Diversification and Downside Protection:
  • 15% to zero beta (“multi-strat”); long/short beta 1; also passive equity extension (“130/30 strategies”).
  • “You want to give your manager the tools to outperform in all markets…when you have long short managers it actually gives them the tools to, to make money on that other side in a bear market.” (A, 15:44)
  • Multi-strat hedge funds provide ballast: “In 2022…multi strat hedge funds were delivering positive returns, like even 10% positive returns when stocks were down 20%.” (A, 16:38)
  • The rest of the public equity allocation (15%) is in low-cost passive indexing.

7. Portable Alpha: Concepts and Approaches

• Definition and Practical Use:
  • “Portable alpha is where you separate alpha and beta…you hire or allocate capital to hedge funds to isolate just the alpha component and then you use derivatives to synthetically replicate the stock or bond beta.” (A, 18:40)
  • Their team does not run a “true” portable alpha program—hedge funds remain within the SAA and leverage is limited (“portable beta light”).
  • “In a true portable alpha program, you want to be levered one to one…In our case, [we] only have about 2% levered bond beta on.” (A, 21:00)

8. Use of Fund of Funds

• Operational Streamlining and Strategic Flexibility:
  • Fund of funds help limit line-item proliferation, provide core/satellite exposure, and allow tracking error management, especially in real estate (using the ODCE index).
  • “We use fund of funds…to help us limit line item sprawl in areas where you do find a lot of traditional closed end vehicles like private equity and venture capital.” (A, 24:33)
  • Similar core/satellite approach being considered for private infrastructure, now that investable indices are emerging.

9. Behavioral Finance and Portfolio Resilience

• Beta as a Friend, Not a Foe:
  • Emphasizing that beta (“the market return”) should not be treated as taboo but as a useful tool.
  • “Sometimes in our industry beta is like a bad word, you know, because the whole goal is to, to beat the index. But I look at beta as, as our friend and, and a tool.” (A, 29:34)
• Anti-Fragility and Avoiding Forced Selling:
  • Operational flexibility and portfolio structures are designed to avoid investment under duress.
  • “Investing is not something that should ever be done under duress…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.” (B, 29:49)
• Mitigating Behavioral Errors:
  • “A lot of ICs out there sell hedge funds at the wrong time…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.” (A, 32:23)

10. Philosophy: Strategic Asset Allocation and Discipline

• Rooted Theses and Discipline:
  • SAA is a tool to avoid hasty/tactical choices during volatility (“cancel your next IC in a crisis”).
  • “Sometimes, like doing nothing sometimes means sitting in cash. And cash is also a choice.” (A, 35:50)

11. Illiquidity as a Feature

• Virtue of Illiquidity:
  • For some investors, illiquidity imposes discipline and can be preferable to liquid options in order to prevent behavioral errors.
  • “There is this value in private equity and venture capital and some of these asset classes where the illiquidity is not the only feature, but is a feature of the asset class.” (B, 36:47)

12. Seeding Funds

• Approach to Seeding:
  • Favoring known blue-chip platforms expanding product offerings (e.g., into new asset classes) for economic advantages; not yet entering the emerging manager space.
  • “It's a little easier for us to underwrite those firms if we've already done like firm odd with them.” (A, 38:04)

13. Consultant Partnership (RVK)

• Essential for Small Teams:
  • “We see RVK as an extension of our team. They help us with capital market assumptions…manager monitoring, manager due diligence.” (A, 39:49)
  • Sourcing is bi-directional based on expertise gaps.
  • On partnerships: “The funnel could start from them or it could start from me.” (A, 40:35)

14. Local Impact

• Public Education Funding:
  • Over $2B distributed to North Dakota schools in the past decade; aiming for full coverage of education costs over time. (A, 42:00)

Notable Quotes & Memorable Moments

• On Portfolio Concentration:

  “We're a three person team all in including operations…our entire $8 billion portfolio is 40 line items, not over diversified yet. And we run a concentrated book.”
  — Frank Mihail (A), 00:00

• On Advantages of Liquidity in Evergreen Funds:

  “Evergreen structures make sense when you're, 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."
  — Frank Mihail (A), 05:06

• On Portable Alpha:

  “Portable alpha is where you separate alpha and beta … you hire or allocate capital to hedge funds to isolate just the alpha component and then you use derivatives to synthetically replicate the stock or bond beta.”
  — Frank Mihail (A), 18:40

• On Behavioral Finance:

  “Investing is not something that should ever be done under duress…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.”
  — David Weisburd (B), 29:49

• On Illiquidity:

  “There is this value in private equity and venture capital…where the illiquidity is not the only feature, but is a feature of the asset class.”
  — David Weisburd (B), 36:47

• On Avoiding Market Timing Errors:

  “A lot of ICs out there sell hedge funds at the wrong time…They fire the hedge funds right after like a two year bull run, which is precisely the time you want to keep them.”
  — Frank Mihail (A), 32:23

• On Consultant Collaboration:

  “We see RVK as an extension of our team. They help us with capital market assumptions…manager due diligence…It's a close and collaborative relationship.”
  — Frank Mihail (A), 39:49

• On Local Impact:

  “Over the last decade, we've distributed more than 2 billion to North Dakota public schools…our fund covers about a quarter of the cost of public education..."
  — Frank Mihail (A), 42:00

Timestamps for Key Segments

• Three-Person Team & Portfolio Structure: 00:00–02:00
• Trust Mandate & Assets: 00:50–01:58
• Portfolio Construction & Alternatives Allocation: 02:00–04:45
• Evergreen Fund Structures & Fees: 04:45–07:25
• Large vs. Small LPs; Co-Investments: 07:25–10:55
• Evergreen Fund Suitability by Asset Class: 10:55–13:50
• Private Equity Secondaries & Proactive Theming: 14:28–15:28
• Hedge Fund Allocation & Role in Down Markets: 15:31–18:22
• Portable Alpha Philosophy: 18:30–22:37
• Fund of Funds in Portfolio: 24:33–27:53
• Beta as a Tool; Behavioral Finance: 28:58–32:23
• ICs, Governance, and Discipline: 34:46–36:00
• Illiquidity as a Feature: 36:00–37:54
• Seeding New Funds: 37:57–39:38
• RVK Consultant Relationship: 39:38–41:25
• Local Impact – Public Education Funding: 42:00–42:39

Conclusion

Frank Mihail’s approach at the North Dakota Land Trust offers a masterclass in disciplined, operationally simple, and behaviorally robust portfolio management at institutional scale. By concentrating risk, leveraging evergreen fund vehicles where appropriate, partnering with top-tier consultants, and focusing on both returns and liquidity, his team achieves both alpha and societal impact—serving as a model for institutions facing similar constraints and missions.