In a recent ION Influencers fireside chat, Frank Mihail, CIO of the $8 billion North Dakota Trust Lands, shared his strategic outlook on private markets. Representing a sovereign wealth endowment that funds K-12 and state college education, Mihail offered a clear-eyed, pragmatic view on asset allocation, manager selection, and the trends shaping the future of institutional portfolios.

Here are the key topics and takeaways from the discussion.

The Macro Backdrop: A “Higher-for-Longer” but Easing Rate Environment

Mihail framed the current macro environment with a measured outlook, which directly informs his asset allocation:

• Interest Rates Have Topped Out: He believes the Fed cutting cycle has begun, with rates normalizing somewhere between the 2020 lows and recent highs.

• Implications for Portfolios: This suggests moderately lower returns for fixed income and private credit, but potential improvement in private equity EBITDA margins as corporate interest expenses decline.

• Ignoring the “Noise”: Mihail emphasized that strategic asset allocation is a long-term exercise. Short-term market reactions, like a “tariff tantrum sell-off,” are considered noise and do not influence their 10-year outlook.

Navigating the Private Credit Landscape: Diversification is the Antidote to Risk

When asked about warnings of a bubble in private credit, Mihail acknowledged the risks but detailed a disciplined, diversified approach to mitigate them.

• A Three-Pronged Strategy: North Dakota Trust Lands breaks its private credit book into three buckets:

  1. Direct Lending: Senior secured loans to private equity-backed companies.

  2. Asset-Backed: A diversified pool including real estate, infrastructure, royalty streams, and consumer finance (e.g., auto loans, credit cards).

  3. Opportunistic: Esoteric strategies, currently focused on distressed credit and credit secondaries.

• On Jamie Dimon’s Warnings: Mihail was pragmatic, noting that lenders will indeed get hit in a crisis. However, he doesn’t try to time the market. Instead, his firm relies on diversification across industries and sub-asset classes to manage systemic risk.

Manager Selection: The Trifecta of Track Record, Alignment, and Listening Skills

Mihail was remarkably candid about what he looks for in a GP—and the red flags that lead to an immediate “no.”

• The Biggest Red Flag: Not Listening. “When a GP doesn’t listen to our needs, it’s probably the easiest way to get passed on.” He encourages GPs to get creative and collaborate on bespoke solutions, like custom “fund-of-one” structures, rather than just pitching their latest fund.

• The Pillars of a Strong GP:

  • Skin in the Game: A meaningful GP commitment is non-negotiable.

  • Fee Alignment: He strongly prefers a “lower management fee, higher performance fee” structure. This promotes a profit-sharing model over an “asset gatherer” model, ensuring the GP wins only when the LP wins.

  • Transparency: Opaque reporting is a major red flag.

  • Succession Planning: The firm must be a “machine” that can operate without its founder, mitigating key-person risk.

The Operational Edge: Why Evergreen Vehicles are Gaining Prominence

Mihail made a powerful case for evergreen and perpetual vehicles, highlighting their strategic value for a lean team.

• Reducing Operational Burden: For a small team of three, evergreen vehicles allow them to “stay invested in perpetuity” rather than constantly re-underwriting and redeploying capital from closed-end funds.

• Cash Efficiency and Risk Profile: He provided a compelling math-based argument: closed-end funds, due to cash drag, require a ~16% return to achieve a 2x multiple, forcing investors to take more risk. Evergreen funds, with their perpetual nature, can achieve the same multiple with a ~10% return, allowing the portfolio to stay within its core risk profile.

• A Liquidity Caveat: He was clear that liquidity in evergreen funds is an option, not a guarantee, and is best suited for rebalancing, not for urgent cash needs.

Co-Investments: Don’t Let the “Fee Tail” Wag the “Risk Dog”

While co-investments offer a clear path to alpha through fee savings, Mihail issued a critical warning.

• The Trade-Off is Concentration: The primary risk is swapping a diversified portfolio for a concentrated bet on a single company.

• Underwriting is Paramount: “You should never let the tail wag the dog.” Saving a few basis points in fees is meaningless if the concentrated bet leads to a 50% loss. Robust, independent underwriting is essential.

Key Takeaways for GPs and the Market:

• For GPs: The most successful firms will be those that act as true partners. This means listening to LP needs, offering creative solutions, demonstrating clear alignment, and building a durable business beyond its founder.

• For the Industry: The democratization of private markets carries real risks for retail investors who may not understand the liquidity constraints of evergreen structures. These products are better suited for high-net-worth individuals and institutions with perpetual time horizons.

• Geographic Outlook: Despite global uncertainties, Mihail “remain[s] bullish on the US for the next three to five years.”

Frank Mihail perspective underscores a central theme for LPs: in a complex market, success hinges on disciplined diversification, operational efficiency, and, above all, partnerships with GPs who are truly aligned with their long-term goals.

Key timestamps:

00:07 Introduction to the Fireside Chat
01:38 Asset Allocation Considerations
04:17 Exploring Private Credit
06:09 Risks in Private Credit
08:08 Private Equity Strategies
09:17 Infrastructure Investment Trends
09:58 Manager Selection Process
13:15 Defining Track Record and Alignment
15:29 Succession Planning in Investment Firms
16:23 The Rise of Evergreen Products
19:46 Co-Investments in Private Markets
21:08 Retailization of Private Markets
22:47 Geographical Outlook for Investments