Frank Mihail, chief investment officer at the $8B North Dakota Trust Lands, recently proposed changes to the institution’s strategic asset allocation, including a new infrastructure benchmark aimed at better aligning risk and volatility profiles — part of a broader effort to preserve alpha within the fund’s portfolio.
The fund currently relies on the MSCI World Infrastructure Index as its benchmark; however, Mihail noted a persistent mismatch stemming from the index’s public market orientation, which contrasts with the trust’s predominantly private market infrastructure holdings.
“There’s a few benchmarks out there that are private market benchmarks, but they’re up the risk curve more in the value-add opportunistic space, whereas our portfolio is mostly lower-risk core investments,” said Mihail, in emailed comments to Markets Group. “That’s where we’re looking to design and build a benchmark around.”
As part of the initiative, North Dakota Trust Lands facilitated a partnership between Wilshire Indexes and GCM Grosvenor to help construct the new FT Wilshire Private Markets Infrastructure Index. The index provides institutions with a measurable and investable standard aligned to core private infrastructure.
“This first-of-its-kind benchmark fills a void for the asset class by providing investors with a transparent, reliable reference point based on the performance of a diversified universe of leading open-ended infrastructure funds,” said GCM Grosvenor in a news release.
The proposal was presented to the North Dakota Land Board on August 20 and is scheduled for a vote on September 24. If approved, it would serve as a critical reference point for a portfolio strategy that’s already evolving.
“The new benchmark will help tighten portfolio tracking error. This will allow us to be more surgical about generating alpha in the infrastructure portfolio. We plan to use a core-satellite approach to portfolio construction and are currently underwriting data center strategies as a potential alpha satellite,” said Mihail.
While the benchmark is being adopted by North Dakota, Mihail emphasized its broader relevance. “To clarify, the new benchmark is for everyone. It doesn’t just solve a problem for North Dakota, it solves a problem for the entire industry. We expect more allocators to start using it in the years ahead after they’ve had time to evaluate it and open their strategic asset allocations for review, which typically happens once every two to five years.”
He pointed to the CFA Institute’s SAMURAI (Specified in advance, Appropriate, Measurable, Unambiguous, Reflective of current investment opinions, Accountable and Investable) framework for benchmark construction and drew a direct line between infrastructure and the long-established NCREIF ODCE Index (a well-known and widely used real estate index that meets all seven properties of a valid benchmark) in real estate.
“We noticed our current benchmark was exhibiting short-term noise. We started asking other allocators what infrastructure benchmarks they use and a few other benchmarks were suggested, but they all have one or more of the following issues: volatility mismatch, risk mismatch or not investable,” said the CIO.
Mihail continued, “The open-end nature of the underlying constituent funds is what makes it investable. It allows a fund-of-funds manager to invest in the index’s underlying constituent funds and use the redemption features to periodically rebalance back to index targets.”
The new infrastructure target, if approved, will rise to 10%, creating a $400M underweight. Mihail said the endowment is considering core-plus exposure and sees long-term upside in digital infrastructure, particularly data centers supporting next-gen technologies like agentic AI.
“We expect agentic AI to create efficiencies in any sector that uses call centers,” added Mihail. “The days of ‘press 0 to speak with a representative’ are over.”
Mihail is pairing that infrastructure evolution with a growing venture capital program he launched shortly after taking the CIO seat in 2023. “We had the willingness and ability to take more risk in the portfolio and the timing worked out well where we were, one, entering the AI revolution and, two, able to access top venture capital fund managers during a time when other allocators were paring back.”
The plan sticks to the large blue chip venture capital names, taking into consideration broad diversification to the space and how to attract the most talented founders. Venture, often avoided by government allocators due to its risk profile, fits North Dakota’s unique structure.
“Because we are a government entity we are often grouped alongside public pensions. But since we don’t have any liabilities and we pay out a 5% annual distribution, our goals are more aligned with those of an endowment. This gives us the ability to take more risk than most government institutions.”
If approved, the new asset allocation will raise private equity and venture to 12%, translating to a pacing plan of $250M per year. While the program is young, AI will be a core theme moving forward.
“Today, AI permeates all subsectors of venture capital just like software/internet did in the early 2000s. We are investing broadly across sectors and stages from seed to late stage.”
