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North Dakota Legacy Fund program makes major investment; amount not divulged

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North Dakota state Capitol

The North Dakota state Capitol in Bismarck is offset by flowers in full bloom in June 2018.

North Dakota's oil tax savings account has made its first investment through a program targeting companies in the state, though officials aren't releasing the amount.

The Legacy Fund's North Dakota Growth Fund program targets a 3% allocation of the $8.4 billion Legacy Fund toward private capital, with a preference to in-state investments. It has invested in St. Louis-based Lewis & Clark AgriFood, a venture capital firm "which has a long track record of investing in the state," according to 50 South Capital, which manages the Growth Fund as general partner.

Company officials refused to disclose the investment amount to the Tribune, citing confidential information. The Growth Fund is authorized up to $250 million but has $100 million for its initial five-year investment period.

“Given its track record of investing in North Dakota and its focus on the agrifood industry, we believe Lewis & Clark AgriFood is an excellent investment for the North Dakota Growth Fund given the breadth and diversity of the state’s agriculture industry and leading entrepreneurs focused on it,” 50 South Capital Managing Director Trey Hart said in a statement Tuesday.

Lewis & Clark AgriFood Investor Relations Manager Jessie Chapel said the company was unavailable for comment Tuesday. She did not immediately respond to emailed questions and deferred to 50 South, whose officials referred company-specific questions back to Lewis & Clark AgriFood.

Lt. Gov. Brent Sanford, who chairs the State Investment Board overseeing the Growth Fund, declined to comment beyond the investment press release.

State Retirement and Investment Office Interim Executive Director Jan Murtha said she was unavailable for immediate comment and deferred to 50 South. The Tribune also unsuccessfully sought the investment amount from the state treasurer's office.

50 South first met with Lewis & Clark AgriFood in 2018, and "circled back with them early this spring," Hart told the Tribune.

The company is not based in North Dakota but does have a track record of investments in companies in the state, which meets the Growth Fund's eligibility requirements, Hart said.

State Agriculture Commissioner Doug Goehring said he is familiar with Lewis & Clark AgriFood from a few projects related to food and agriculture distribution, transportation and technologies, including the Bushel agriculture app.

"They seem to have a pretty good nose for good investments. That's the way it looks anyway," Goehring said.

The 2021 Legislature passed a bill directing the State Investment Board to invest a target 20% of the Legacy Fund in the state, putting half in equities, or investing in companies in the state, and the other half in infrastructure loans to local governments and a business loan program through the state-owned Bank of North Dakota. The first 10% includes the 3% targeted by the Growth Fund.

The Legacy Fund's advisory board on Thursday will hear more in-state investment proposals and public comments.

Thirty percent of monthly state oil tax revenue goes into the Legacy Fund, which voters created in 2010. Lawmakers couldn't use the fund or its earnings until the 2017-19 budget cycle. 

The fund generated more than $871 million of earnings in the 2019-21 budget cycle. The Legislature has used the fund's earnings only for balancing state budgets and backfilling a shorted state school aid fund.

The Republican-led Legislature this year passed a slate of bills tabbed as the Legacy Fund "trifecta" for putting the savings account to specific uses, including infrastructure bonding repayments and in-state investments. About 1-2% of the Legacy Fund had been invested in North Dakota. The push in the Legislature was to put more of the fund to work within the state, including a $680 million infrastructure bonding bill. Legacy Fund earnings will repay the borrowed money within 20 years.

Last week, the state Retirement and Investment Office recommended the advisory board study the portfolio of the entire Legacy Fund due to the different components of the new investment mandates. The panel did not act due to three of its seven members being absent later in the meeting, but the board is expected to revisit the recommendation this week. 

Implementation of the new Legacy Fund investment mandates has been impeded due to vacant positions at the Retirement and Investment Office, which oversees about $20 billion of assets. In the last year and a half, the office has lost 175 years of experience due to employees' retirements and resignations, according to Murtha.

"We are well aware that the expectation in relation to the rollout of (the investment strategy) is evolving, it's important and we want to support it, but we didn't have the staffing levels to support it," she told the House Appropriations Committee last week.

The new investment strategy added "an additional layer of complexity" to the office's workload, she said.

Retirement & Investment Office Interim Executive Director Jan Murtha discusses her agency's staff needs.

Thirteen of 19 office positions were filled, as of two weeks ago. The office needs a chief risk officer and chief investment officer.

Murtha told the House budget panel that the agency needs six new full-time employees to meet expectations, and wants to use special funds for the positions -- four more investment professionals, another investment accountant and a programs outreach coordinator.

The latter position is key "because we have no resources dedicated to programs outreach" regarding the new in-state investment components, Murtha told the panel.

The investment strategy generated increased demand for information from the office. Office employees don't have the bandwidth to handle the level of interest and calls that have come into the agency outside of 50 South's parameters, Murtha told the Tribune last month.

"If we can't staff to needs, we have to reduce expectations. We do not want to underperform," she told lawmakers.

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

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