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Grosvenor, 50 South outline in‑state pipeline; committee debates IPS limits and pooling for state funds
Summary
GCM Grosvenor and 50 South Capital presented in‑state infrastructure and private‑equity pipelines to the Legacy Fund Advisory Committee and RIO staff and committee members debated whether the current in‑state investment policy should be revised to permit larger, single‑asset projects and how wider pooling of client accounts should proceed.
Two external managers and RIO staff used the committee meeting to update the Legacy Fund Advisory Committee on in‑state investment activity and on how the state is structuring its in‑state programs.
GCM Grosvenor presentation: Steven Brewster, Scott Littman and Michael Rose of GCM Grosvenor reviewed the firm’s existing relationship with the State Investment Board, the performance of the firm’s Critical Infrastructure Solutions (CIS) funds and an early pipeline of North Dakota‑focused infrastructure opportunities. Grosvenor reminded the committee that the Legacy Fund previously committed $75 million to CIS2 and $105 million to CIS3; CIS2 is in wind‑down with distributions already sent back to the state and CIS3 is still deploying capital. The firm said the newly launched North Dakota Real Assets Fund had a $150 million commitment from the Legacy Fund but had not yet put capital to work as of the June 30 reporting date.
Grosvenor described a pipeline that includes two midstream energy projects — identified in the presentation as Project Lion (long‑haul pipeline) and Project Speaker (gathering/collection infrastructure) — that the firm said were being developed by sponsors already engaged with Grosvenor. Michael Rose and Scott Littman said those two projects are among the most advanced in their in‑state pipeline and could be fundable opportunities if commercial commitments and project finance structures progress. Littman said the firm generally seeks co‑investment structures so that outside capital joins state capital; he added that Grosvenor believes asset‑level selection can add performance and said it expects to outperform commingled fund return baselines through asset selection and direct investments.
50 South presentation: Cody Furst of 50 South Capital gave the committee an update on the North Dakota Growth Fund, which the state increased this year to $250 million (the Growth Fund itself includes prior commitments). Furst said 50 South had made eight fund commitments and four direct co‑investments that together had placed roughly $121.5 million of the fund’s capital into managers and companies as of the October update. Furst said portfolio managers and partner funds supported by the Growth Fund have invested approximately $164.7 million into North Dakota companies, reflecting outside LP capital drawn in by managers that 50 South backs. Furst highlighted the Growth Fund’s pacing and diversification approach, described three recent commitments (an early‑stage venture manager, a Fargo‑based growth equity manager, and a private‑credit SBIC), and reviewed underlying portfolio company examples, including food‑brand and technology startups and an industrial company expanding rail‑related operations.
Policy and pooling discussion: Committee members asked whether existing in‑state limits and the current investment policy statement (IPS) would permit a larger single infrastructure commitment if an opportunity surfaced. RIO staff (portfolio manager Lance Zitlow and executive director Jody Smith) reminded the committee that the IPS currently caps single direct in‑state investments at $10 million, with the IPS allowing up to two exceptions of $25 million each. The IPS also directs RIO to prefer investments where third‑party private capital is invested alongside Legacy Fund capital and to avoid situations where the State becomes a controlling owner. Smith and RIO staff also discussed a separate operational topic: RIO has begun pooling several client accounts for purchase economies of scale, and staff said fully implementing more pooled accounts would reduce some operational burdens and manager fees but would increase accounting and public‑records complexity in the short run. RIO asked the committee whether it wanted staff to continue pooling additional client accounts; committee members asked for additional information and for a comparison to practices in other sovereign‑style funds before a final direction is given.
Next steps: Committee members asked RIO to return with a proposed IPS update that would clarify pacing, exception rules, and the process for considering larger, single‑asset in‑state investments. RIO agreed to return with staffing and system‑cost estimates needed to implement broader pooling and to show policy options for committee consideration.
