State Investment Board puts Legacy Fund investments to work for North Dakotans, makes changes to further improve performance
Board increases loan fund for new businesses by $100M, adopts best practice for defining Legacy Fund earnings
BISMARCK, N.D. – The North Dakota State Investment Board (SIB) has dedicated an additional $100 million in Legacy Fund investments to providing cost-efficient financing to companies seeking to develop new businesses and infrastructure in North Dakota – one of several actions taken by the board to further improve the Legacy Fund’s performance and return for North Dakotans.
The $100 million addition to the Bank of North Dakota’s Match Loan Certificates of Deposit (CD) Investment Program will increase the program’s total size from $200 million to $300 million.
The state-owned Bank of North Dakota requested the increase to support future anticipated growth in this economic development program, which has been in place for over 30 years.
“This increase in funding will provide greater access to capital for entrepreneurs looking to launch new manufacturing, processing and value-added businesses and important infrastructure in North Dakota, while also ensuring that more Legacy Fund dollars are being invested right here in North Dakota,” said Lt. Gov. Brent Sanford, who chairs the SIB.
In addition to increasing the match loan funding, the board also:
• Confirmed that the Percent of Market Value (POMV) approach is a prudent, responsible and transparent method for defining future earnings of the Legacy Fund.
“The POMV approach is commonly used by similar investment funds, including North Dakota’s Common Schools Trust Fund, in developing a sustainable spending policy,” said Dave Hunter, executive director of the state’s Retirement and Investment Office. “It is widely accepted as a best practice by many endowments and foundations and should serve to benefit all North Dakotans.”
The POMV approach uses the average ending market value of the Legacy Fund from the prior five fiscal years and then applies an earnings distribution of 2, 3, 4 or 5 percent to the state’s general fund to establish a sustainable spending policy for the future. The board encourages the Legislature to embrace this approach through legislation.
“This approach seeks to eliminate undue risk when developing a sustainable spending policy for future state budgeting and reporting purposes,” state Treasurer Kelly Schmidt said.
“The Percent of Market Value approach increases transparency, is sustainable, and is a proven method that is used by other funds similar to the Legacy Fund,” Insurance Commissioner Jon Godfread said. “Moving to the POMV approach will give the Legislature a consistent approach for utilization in the budgeting process while protecting the integrity of the Legacy Fund.”
• Approved up to a $75 million commitment to Adams Street Partners 2019 Global Fund. Adams Street, and its predecessor firm Brinson Partners, have a strategic investment relationship with the NDSIB dating back over 30 years. Adams Street is the bestperforming private equity manager for the SIB in addition to representing its largest private equity relationship.
• Approved the North Dakota Office of the Attorney General as a new contractual investment client of the SIB, contingent upon approval of the North Dakota Industrial Commission later this month.
The SIB has statutory responsibility for the administration of the investment programs of several funds including the Public Employees Retirement System (PERS), the Teachers' Fund for Retirement (TFFR) and the Workforce Safety & Insurance Fund. The SIB also maintains contractual relationships for investment management with certain political subdivisions. The 12-member Board consists of the lieutenant governor, state treasurer, state insurance commissioner, executive director of Workforce Safety & Insurance, state land commissioner, three representatives of PERS and three representatives of TFFR in addition to one non-voting member from the Legacy and Budget Stabilization Fund Advisory Board