Institutional Investor is proud to recognize leaders within the allocator community for their outstanding contributions to portfolio development at the second annual AlphaEdge Recognition Dinner. Prior to the event, we sat down with Michael W. Frerichs, recognized in the category of Alpha Generation – Real Assets Investing.
Based out of Champaign, south of Chicago, Treasurer Frerichs has led a life of public service. He was first elected to the Illinois State Treasury in November 2014, having been re-elected twice. In his third term as Illinois State Treasurer, he oversees $56 billion as the state’s Chief Investment and Banking Officer.
The Treasurer is a graduate of Yale University, where he received his bachelor’s degree. After graduation, he spent two years teaching English in Taiwan and served as a volunteer firefighter. Prior to his role as Treasurer, he was elected as Illinois State Senator to represent east-central Illinois.
During his tenure, he assumed leadership of a bipartisan multi-state alliance, Achieving a Better Life Experience Program (ABLE), allowing parents of children with blindness or a disability to save for their child without jeopardizing their federal disability benefits. In November 2018, he launched Illinois Secure Choice, a retirement savings program “to help an estimated 1.2 million private-sector workers who do not have access to an employer-sponsored retirement plan retire with dignity.”
The following has been edited for length and clarity.
What is the biggest challenge facing your industry?
For me, the biggest challenge is the anti-ESG blowback that I think is politically motivated. We believe in transparency, disclosure and access to information, and I think there’s an effort to restrict data to investors like me – and recent Supreme Court rulings have emboldened anti-DEI.
There are money managers that are worried about attracting lawsuits, that if they publish information on DEI that may lead to lawsuits.
What part of your portfolio are you most excited about?
There are lots of things that get me excited. If I had to pick one today, it’s our first fund: It’s our infrastructure fund, and it’s interesting because it’s groundbreaking. We get to invest in data centers, in energy, in alternative energy suppliers. It’s a place that is new. We think it’s a great opportunity to get returns, but also to make an impact in our state.
Do you think there’s opportunity for other state treasurers?
Most definitely. I’ve had several conversations with other state treasurers, so I told my team we need to do this right, and there’ll be much more capital; if we do this wrong, we will be the first and the last.
Who were your mentors, and what made you get into this industry?
John Goldstein works for Goldman Sachs: I’ve known him since he was running Imprint Capital and has been a great sounding board and at times a mentor.
U.S. Senator Dick Durbin was a mentor for getting into politics. Dick Durbin is a great guy: When I first ran for office 26 years ago, 27 years ago, I was running against an entrenched incumbent, and he came and ran a fundraiser and generated press, not because he thought I had a real chance of winning but backing people in it for the right reasons. He’d pull up in his car – “Hi, I’m Dick Durbin" – a humble, great guy; he’s now the number two guy in the Senate.
If you weren’t in this job, what would you be doing?
I would be doing some very similar: I get excited about helping people, creating opportunity. If I couldn’t be the State Treasurer, I’d look for elected office where I could make a great impact.
I’d love to be an ambassador: I'd love to represent the United States overseas.
What is one thing you’d like to change about the State of Illinois?
For us, I think the disclosure is important; access to information is important. Investing is not easy. It’s a lot of work, and with more data, it’s more work, but with more data, you’re more likely to make better decisions.
For those out there who say, “ESG is a fad,” I think that’s great; You’re under no obligation to read it; under no obligation to consider risk. If others choose to do this blind, that’s better for me, but if you believe in free markets, they work best with free information – so as the value has changed from tangible assets to intangible assets, the nature of risk has changed, as well, and we would like more information to make better decisions.
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