The process begins with the client fund. Each fund’s board or staff works with the State Investment Board (SIB) to establish an Investment Policy Statement setting the fund’s objectives and how it’s assets will be invested. Both the Client and the SIB approve it, consistent with NDCC § 21-10-02.1.
Each Investment Policy Statement covers:
- Plan Overview - the fund’s purpose, the statutory or other reason it exists, and what the client needs it to achieve, including growth, tolerable uncertainty, and distribution requirements.
- Responsibilities and discretion - what the SIB is authorized to do, including oversight and delegation, much of which is discretion to outlined in North Dakota Century Code.
- Investment Objectives - risk tolerance and net return expectations.
- Asset Allocation - target allocation, tolerable deviation from target allocation, and how the fund is benchmarked, accounting for illiquid asset holdings.
- Restrictions and guidelines - including use of derivatives, investment management for the exclusive benefit of the beneficiary, and compliance with laws, regulations, and policies governing the SIB.
- Internal controls - designed to prevent the loss of funds arising from fraud, error, or mismanagement.
- Evaluation and review - performance, asset value, fees, investment managers, legal and legislative developments affecting the SIB, compliance with goals and objectives of the fund, asset allocation and any changes to the benchmark used to monitor the fund.
- Withdrawal - how distributions are made, so client objectives can be met and liquidity risk managed.