Episode summary
Learn from a top 1% CIO: Hall of Famer Larry Krummen, CIO of MoDOT and Highway Patrol Retirement
Summary
Larry Krumman said his biggest job at Missouri DOT and Patrol Retirement System was not finding a single magic trade, but building governance, staff, and policy after becoming the system’s first CIO in 2003. He described a turnaround that began with board buy-in, new investment policies, added resources, and a portfolio overhaul, while also attacking the fund’s bigger problem: persistent underfunding. He said the employers were paying 58 cents on the dollar for many years after the financial crisis, so getting contribution rates down mattered as much as investment returns.
Krumman argued that the crisis forced a reset. He said the fund had taken on too much alternative risk, the board felt underadvised, and the team had to re-educate everyone and rebuild trust step by step. That process eventually led to a more flexible portfolio with lower volatility, a wider use of alternatives, and a long-leash policy framework that let him act on opportunities.
He highlighted several recent moves: a large 2025 shift into government-guaranteed mortgage bonds and a renewed emphasis on fixed income, along with timber, agriculture, and essential-service retail real estate. He said the fund’s best-performing strategies have often come from niche, hands-on deal sourcing, and he expects higher rates, inflation, and water scarcity to make real assets and fixed income even more important.
Key takeaways
- Krumman said the fund’s turnaround started with governance, staffing, and long-term policy changes, not a quick fix.
- He said the most important win was getting employer contribution rates down from 58 cents on the dollar.
- He said 2025 purchases of government-guaranteed mortgage bonds totaled upwards of a billion dollars and matched or exceeded the fund’s actuarial hurdle.
- He said timber and agriculture became the fund’s best-performing strategy over the last 10 years after a pilot program was expanded.
- He expects higher rates and inflation to give pension plans more reason to simplify portfolios and lean back into traditional fixed income.
Notable quotes
“It really has and it's a good story to tell. I I I think we could be helpful for a lot of other public funds”
“I think we had that plan and then the financial crisis came and we got punched in the face”
“If you can do things without the complexity and and blackbox hedge fund structures and complicated natures of portable alpha”
“we bought upwards of a billion dollars in in 2025 and redid our internal fixed income portfolio”
How the episode opens
Hi, I'm Christine Jordano with Markets Group and I'm here with Chief Investment Officer Larry Krumman. He is heading Missouri DOT and Patrol Retirement System. That's a $4.5 billion system. The interesting thing about Larry is that he has scored in the top 1% of funds in the country for the past one, three, five, 10, and 20 years. Congratulations, Larry.
Thanks, Christine.
I'd really love to learn how you did this, what you set up as the very first CIO that MD dot and patrol system ever had. and go into this. You are about to win a Hall of Fame award from Markets Group at our Kansas City, Missouri event.
You've been nominated multiple times for the award, but I'm sure everyone is scratching their heads going, "How did he do it? Larry, as the very first CIO, what did you have to set up in order to do it right? Yeah, first off, thanks for thanks for the award and certainly it's a pleasure working with you and getting to know your team.
It's it's been a long road. It really has and it's a good story to tell. I I I think we could be helpful for a lot of other public funds that are going through similar challenges with funding and returns etc.
But it it took a took a lot of baby steps. It's nothing that you can fix overnight. When we came here, uh I started in 2003.
Our system was created in 1955. It had really it took us 48 years to get to the point where we were in in 2003. You can't reverse that course overnight.
You've got to set a lot of long-term policies in place and just start slowly whittling away at the challenges that you've got and the structure that you need to put in place to really turn things around.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- c i o investment strategies
- long-term performance
- portfolio risk management
- top tier investing
Companies and tickers mentioned
- MoDOT
- Highway Patrol Retirement
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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