BISMARCK, ND – The North Dakota Retirement and Investment Office (RIO) reported today that the Legacy Fund, the state’s sovereign wealth fund, has topped $10 billion.
“Strong investment performance and higher than anticipated oil tax revenue contributed to the Legacy Fund reaching this milestone,” said RIO Executive Director Jan Murtha. The State Investment Board (SIB) is responsible for investment of the Legacy Fund. RIO coordinates SIB activities.
Third-quarter reports show the fund’s market value at $10.55 billion. At the end of the last fiscal year, after transferring more than $486 million in earnings to the state’s general fund, the Legacy Fund dipped below $9 billion.
The Legacy Fund is supported by oil production and extraction taxes with the intention of the fund being to provide a continuous source of income for the state. Over the first three quarters of the biennium, the fund received $563.9 million in oil tax revenue, an amount 12% above the forecast.
State legislators and Legacy and Budget Stabilization Fund Advisory Board Members work closely with RIO to support the fund’s growth.
“Changes to the structure of the Legacy Fund’s in-state investment program are creating more investment opportunities in North Dakota,” said Sen. Jerry Klein, the Legacy Fund advisory board chair.
During the 2023 session, the Legacy Fund assets dedicated to an in-state investment program were changed from percentages to fixed dollar amounts, more accurately targeting the investment opportunities available within the state. Approximately $400 million of the $1.3 billion dedicated to the fixed income and private equity programs is now invested in North Dakota. A Legacy Fund advisory board consultant anticipates the full amount will be invested by 2030.
Legislators also approved a more predictable method of calculating the earnings that are transferred to the general fund at the end of each biennium. Over the past three biennium, more than $1.8 billion has been returned. The earnings transferred at the close of FY2023 were used to provide North Dakotans with tax relief, pay debt on previously issued bonds, and support the highway tax distribution fund.
A legislature-initiated constitutional measure on the November ballot could increase Legacy Fund returns by reducing legislative drawdown of the fund’s principal balance to up to 5% per biennium. Currently, with a two-thirds vote in each house, state law allows the legislature to access up to 15% of the fund’s principal balance per biennium.
“Reducing the amount of the Legacy Fund principal that may be drawn down enables the Legacy Fund asset allocation to be more efficient - generating better returns at a lower risk,” said Chief Investment Officer Scott Anderson. To date, only earnings have been transferred to the general fund.
North Dakota’s Legacy Fund was created by a constitutional amendment that was initiated by the state legislature and approved by voters in November 2010. Legacy Fund investments are identified in monthly performance reports available online at www.rio.nd.gov/legacy-fund. Information about the in-state investment program is available online at www.rio.nd.gov/in-state-investment-program. Actuarial, financial and investment reports, and SIB meeting packets and minutes are also readily available on the agency’s website, www.rio.nd.gov.