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Study OK'd for North Dakota Legacy Fund in-state investing

Study OK'd for North Dakota Legacy Fund in-state investing

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The advisory board for North Dakota's oil tax savings account has approved a study of in-state investing of the voter-approved fund.

The Legacy and Budget Stabilization Fund Advisory Board on Thursday voted unanimously to adopt a consultant's phased approach for a study of an in-state investment program for the $7.5 billion Legacy Fund. The study's early stages involve conducting a fiduciary review and designing a portfolio.

The study will unfold throughout early 2021, likely to April, a timeline parallel to the upcoming legislative session.

North Dakota's State Investment Board, comprising 12 members including the state treasurer, insurance commissioner and lieutenant governor, last month endorsed the study after hearing several firms' presentations of in-state investment strategies. Insurance Commissioner Jon Godfread also has presented such a proposal.

Advisory board members urged the process move gingerly.

"It isn't complicated, but it's more complicated than a person thinks," said Rep. Keith Kempenich, R-Bowman, who chairs the board.

Tax Commissioner Ryan Rauschenberger added, "As it's been said many times today, we need to do it right. We need to look at a lot before we get to the parameters setting. We need to do as much education as we possibly can."

The Legacy Fund's in-state investments with the Bank of North Dakota were valued at more than $113 million as of Sept. 30. That's 1.5% of the fund. 

The study will gather information on how to develop a program to fit with the fund's existing investment framework, said Dave Hunter, executive director and chief investment officer of the state Retirement & Investment Office.

"We want to work with (the consultant) and the managers who are experienced in this to be able to figure out what is the best fit for the opportunity set that we have here in North Dakota and what we think we can get the best risk-adjusted returns for the Legacy Fund, while of course attracting additional capital to North Dakota," Hunter said. 

State Treasurer Kelly Schmidt, who leaves office next month after 16 years, urged caution for the path ahead, advocating to find out what other states have done wrong and to keep politics out of decisions.

"It's like making sausage," the state's longest-serving treasurer said. "It's the only time I ever heard my in-laws cuss at each other because my father-in-law wanted more garlic and my mother-in-law wanted more pepper, but you know what? By the time they got it all figured out, we had some really good sausage, but you had to pad it a little bit and throw it in the fry pan and taste it a little bit."

Kempenich said a bigger issue is "defining the mission" of in-state investing. 

"Invest in North Dakota? OK, that's the mission, but I think it's what do we want to accomplish about investing in North Dakota, and I think that's where the conversation is," the longtime state representative told the Tribune. 

The State Investment Board meets next week and will hear about in-state investment program board governance, Hunter said.

Reach Jack Dura at 701-250-8225 or jack.dura@bismarcktribune.com.

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