Having served on the State Investment Board on behalf of Governor George Sinner, I have always had an interest in the $ 8 billion pot of gold accumulated in the state treasury from oil revenues.
The Forum and KX News have searched the State Investment Board for a smoking gun, questioning whether North Dakota is being served by consultants who have worked for the state for two decades.
Since financial agreements between the State Investment Board and the consultants are exempt from North Dakota’s Open Case Law, the search has been slow and cumbersome. Some of the basic information is not available to researchers.
Support for investment in the State
One of the main complaints about the state’s investment has been the inability to invest a portion of that $ 8 largesse in North Dakota. In its report, KX cited surveys that indicate broad public support for investing more money in the state.
One of the investigators, according to KX reports, drew attention to some of the out-of-state investments that to ordinary citizens look like embezzlement, if not worse.
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KX reports that Fargo’s attorney, Luke Heck, has found investments in 89 countries, including 37 different investments in China, many of which are “linked to the Chinese Communist Party.”
When the state hires investment advisers, the State Investment Board continues to examine the return on investment. However, the consultants look to the most profitable investments. At one point, we fired an underperforming fund manager who was earning a modest 26% return. Other managers earned more.
This ground conflicts with the North Dakota non-investment complaint. Consultants cannot produce strong performance records with investments in North Dakota. It is a truth that we find difficult to accept.
KX asked Rep. Keith Kempenich, R-Bowman, who had chaired the Legacy Fund’s advisory board, about consultant Callan’s influence on the investment board. Kempenich noted that the board vote on issues was almost always 11-0.
The reason the votes are unanimous is that no one on the board has the expertise to second guess others in the complex game of investing. As a member of the board of directors, I had no qualifications in real investing. We have always followed our real estate investment advisor who worked in unison with the out of state consultants.
Just because someone is elected to a public office does not mean that they know about investing. The main task of the State Investment Board and its resident consultant is to find the best investment minds available to manage its portfolios. This is how well an 11 hobbyist board can work.
If there are any questions about Callan’s secondary relationships that may be unfavorable to North Dakota’s interests, the board should hire other qualified investors to analyze the investment program with an emphasis on l integrity if that is the issue.
After all, $ 8 billion in investment is a lot of money, and it may be worth paying for an independent review to deal with suspicion and doubts.
There is a strong sentiment in North Dakota for using the Legacy Fund for state investment.
Because of this sentiment, the board should leave $ 7 billion for the yield investment, but set aside $ 1 billion for a venture capital program in the state with different expectations of high returns. We can afford it.
Communities in North Dakota have plenty of experience with city and county underwriting failures – which are sure to happen in the corporate game. The billion dollars for business within the state must be structured so that professional judgment, not local politics or politicians, controls decisions.
Lloyd Omdahl is a political scientist and former Democratic Lieutenant Governor of North Dakota.