By: Amy Dalrymple (ND Monitor)
North Dakota’s Legacy Fund lost about $1 billion in value last week as the stock market plunged, but the investments are managed to weather volatility, according to testimony from a legislative hearing this week.
Jodi Smith, interim executive director of the Retirement and Investment Office, commented on the impact of the stock market fluctuations Wednesday during a meeting of the Senate Appropriations Government Operations Division.
“The market will ebb and flow and it will go up and down, and really what determines the market is how we react to it,” Smith told lawmakers. “Our goal is to not be very reactionary.”
The Legacy Fund, created by voters to invest state oil and gas revenue, was valued at $12 billion as of Jan. 31. A more recent value is not yet available from the Retirement and Investment Office, which administers the investments.
Smith said after she made her comments to the committee, the market had gone up again. The stock market has been volatile since President Donald Trump last week announced tariffs on international imports.
“We anticipate a recovery of our losses when the market normalizes,” she said Thursday.
Scott Anderson, chief investment officer, said the Legacy Fund is diversified in order to withstand market fluctuations. The long-term nature and large scale of the investments also give the state advantages to balance risk, he said.
“We recognize, though, that there’ll be short-term fluctuations,” Anderson said.
North Dakota lawmakers spend earnings from the Legacy Fund to pay for tax relief and state projects. To “smooth out” fluctuations with the markets, the amount available for lawmakers to spend is based on a five-year average of the Legacy Fund’s value, Anderson said. Earnings are defined as 7% of that five-year average.
Lawmakers have $601 million in earnings available to spend for the 2025-27 budget cycle, a figure that was already established and won’t be affected by the market.
The principal of the Legacy Fund can only be tapped with two-thirds approval from the Legislature. So far, lawmakers have not spent any of the principal.
The Retirement and Investment Office also recently hired additional internal investment managers, reducing how much the state will spend on fees to external investment managers. Growing the internal investment program also allows the state to rebalance portfolios more quickly and precisely, Anderson said.
