Jamestown lawmaker calls for SIB contracts with asset managers and advisors – Jamestown Sun

JAMESTOWN — Rep. Bernie Satrom, R-Jamestown, called for the release of all contracts the State Investment Board has with its outside advisers and money managers who invest the taxes paid into the Legacy Fund.

Satrom requested the contracts from Janily Murtha, executive director of the North Dakota Retirement and Investment Office.

“We know that the State Investment Board is covering up money managers’ investments,” he said. “Now we have to find out whether they are covering up their contracts with these asset managers.”

Satrom said the public is not getting clear answers about some of the Legacy Fund's investments and has therefore requested a copy of all contracts the State Investment Board has with its outside advisors and asset managers.

“Has the State Investment Board allowed asset managers to write contracts that exempt them from transparency and records disclosure laws?” he said. “I think North Dakota taxpayers have a right to know where their money is being invested. The State Investment Board should not be able to block.”

Satrom said that when it comes to Legacy Fund investments, all roads lead back to transparency.

“There appears to be a bottleneck in information gathering,” he said. “We have billions in mixed funds and have little or no idea where they are invested. This money belongs to our taxpayers. Don’t they have a right to know?”

State Investment Board members say they fully support the transparency of the state's Legacy Fund, but caution that legislative proposals targeting the Legacy Fund should not undermine its stability and growth or jeopardize its state investment program .

“The State Investment Board is committed to ensuring that Legacy Fund investments are managed responsibly to support North Dakota’s future,” said Lt. Gov. Tammy Miller, the board's chairwoman. “Under careful supervision by the Retirement and Investment Office, the Fund emphasizes capital protection, high returns and compliance with fiduciary duties.”

Courtesy / Governor's Office

Earlier this year, Tory Jackson, a Bismarck attorney, filed an open records request with the state investment board but was denied a list of Legacy Fund investments abroad totaling nearly $800 million, Satrom said.

At Jackson's request, the District 12 Republican delegation identified $2.3 billion in additional commingled funds and other funds where money managers control the specific investments but remain hidden from the public, he said. He added that the delegation sought further information about these hidden investments totaling over $3.1 billion.

In a letter to Attorney General Drew Wrigley, Jackson said the State Investment Board may be allowing its asset managers to avoid compliance with the state's open records laws, Satrom said.

“It is possible,” Jackson wrote, “that the RIO may rely on confidentiality provisions contained in its contracts with the money managers, but RIO cannot prevail to avoid disclosure requirements under state law.”

According to the Office of State Treasurer's website, North Dakota voters approved a measure in 2010 that created the Legacy Fund, which provides a permanent source of revenue for the state from the nation's finite resources of oil and natural gas. According to the North Dakota Retirement and Investment Office website, 30 percent of taxes on petroleum mined and produced in North Dakota are remitted monthly to the Legacy Fund.

The Legacy Fund had $11.1 billion as of July 31.

The District 12 Republican delegation plans to introduce the Legacy Fund Transparency Act during the next legislative session, which will require the State Investment Board to disclose any investment in the North Dakota Legacy Fund.

The Legacy Fund, managed as a state fund, aims to provide long-term financial security for North Dakota by depositing 30% of the state's oil and gas tax revenues and investing those funds to generate returns for the state, the State Investment The board said this in a press release. The State Investment Board said the Legacy Fund will be managed as a sovereign wealth fund to promote financial stability and enable North Dakotans to continue to benefit from the state's natural resources for generations to come, regardless of market and industry fluctuations impact the oil and gas sector.

“Consistent with the prudent investor rule, diversifying our investments is critical,” said Thomas Beadle, state treasurer, member of the State Investment Board and chair of the board’s investment committee. “Through broad diversification – across markets and regions – we invest responsibly and protect the resilience of the fund.”

Courtesy of Thomas Beadle

Satrom questioned how the precautionary measure for investors was applied when the State Investment Board decided to buy Russian government bonds.

“How did they apply the prudent investor rule when they decided to invest in Chinese-style detention centers?” he said.

As of the end of February 2022, North Dakota had a total of $15.9 million in investments with Russian exposure in the state's legacy fund, pension fund and insurance pool, which are overseen by the State Investment Board, the governor's office said in a news release at the time with. The governor's office said board members were informed a few days later that Russia exposure fell by $5.9 million to $10 million as investment managers exited their investment positions and the value of investments with Russia exposure has fallen.

Satrom also said that the Legacy Fund is or has been invested in over 60 countries, including Argentina, Colombia, Kazakhstan, Kenya, Mexico, Togo, Turkey and China.

The Legacy Fund's investment practices are consistent with those of other large sovereign wealth funds, including Alaska's Permanent Fund and Norway's Government Pension Fund Global, the State Investment Board said.

The board said this approach includes a careful allocation of 2.77% to China, the world's second-largest economy, to access a broader range of opportunities and strengthen risk-adjusted returns. The board added that Norway invests about 3% of its fund in China. By comparison, 8% of the Legacy Fund's assets are earmarked for investments in North Dakota, the board said.

The State Investment Board said it avoids investments restricted by the federal government and strictly follows guidelines from the U.S. Treasury Department's Office of Foreign Assets Control.

The Office of Foreign Assets Control administers and enforces economic and trade sanctions based on U.S. foreign policy and national security objectives against targeted foreign countries and regimes, terrorists, international drug traffickers, and individuals engaged in activities related to the proliferation of weapons of mass destruction other threats to U.S. national security, foreign policy or economy, the website says.

“Transparency and prudent oversight are central to our investment management approach,” Jan Murtha, executive director of the North Dakota Retirement and Investment Office, said in the release. “Our team monitors the portfolio to ensure compliance with investment guidelines for all client funds.”

While some investment information is kept confidential by law to protect strategic and market-sensitive data, the North Dakota Retirement and Investment Office is required to share Legacy Fund information as fully as possible as permitted by state and federal law, Murtha said.

Legacy Fund assets are allocated according to the guidelines of the Legacy and Budget Stabilization Fund Advisory Board, which consists of six state legislators as voting members and four citizen members as non-voting members, according to the State Investment Board. The State Investment Board said it follows these guidelines and state laws in managing the assets. The Investment Committee of the State Investment Board monitors investments within the established parameters.

These policies have generated positive returns for North Dakota taxpayers, with a five-year annual return of 6.6%, which exceeds the rate of inflation by more than 2% and exceeds the policy's benchmark return of 5.8%, the board said.

The District 12 delegation also expressed concerns that the State Investment Board is incorrectly treating the Legacy Fund as a pension fund.

Satrom previously told The Jamestown Sun that the State Investment Board is seeking a return of about 5% to 7%. He said the U.S. has experienced an inflation rate of 22% over the past three and a half years.

“So if you're making 5% returns a year, you almost can't even keep up with inflation,” he said. “You might think you're doing really well, but I'd argue you're really doing bad.”