Latest news with #StateInvestmentBoard
Yahoo
16-04-2025
- Business
- Yahoo
ND Senate fails bill to divest Legacy Fund from China
Apr. 16—BISMARCK — The North Dakota Senate failed a bill on a 20-26 vote Tuesday, April 15, that would have allowed the State Investment Board to divest Legacy Fund investments from Chinese companies. Sens. Cole Conley and Terry Wanzek, both R-Jamestown, voted in favor of House Bill 1330. HB 1330 would have added language to the prudent investor rule to define a Chinese company as a company domiciled in China. Sen. Sean Cleary, R-Bismarck, a supporter of the bill, said HB 1330 allows but does not require the State Investment Board to divest Legacy Fund holdings from Chinese companies. "I think there's circumstances where it's appropriate for the SIB (State Investment Board) to take a look at all the factors that are surrounding where our Legacy Fund is invested and make a decision based on those factors," he said. "I think a green vote on this bill positions them to do that. It gives them the flexibility to divest from direct investments in China." Sen. Cole Conley, R-Jamestown, a sponsor of the bill, said the Legacy Fund is being used to invest in China's sovereign wealth fund. "I'm not sure why we are doing that," he said. Sen. Jeffery Magrum, R-Hazelton, said the state could lose money on its Legacy Fund investments in Chinese companies if the U.S. goes to war with China. "I think divesting would have been great, but if the state investment board has the option to say, we need to pull the plug on our investments over there, it does give them the option," he said. In 2010, North Dakota voters approved a measure that created the Legacy Fund, which is a perpetual source of state revenue from the finite national resources of oil and natural gas, according to the Office of State Treasurer's website. Thirty percent of the taxes on petroleum produced and extracted in North Dakota are transferred to the Legacy Fund monthly, according to the North Dakota Retirement and Investment Office's website. The Legacy Fund has over $12 billion as of Jan. 31. It has earned over $600 million for the 2023-25 biennium. The State Investment Board has statutory responsibility for the administration of the investment programs of several funds including the Legacy Fund, according to the Retirement and Investment Office's website. Sen. Michael Dwyer, R-Bismarck, who opposed the bill, said about $22 million of the Legacy Fund is in direct holdings in Chinese companies. "The State Investment Board operates under a prudent investment rule and there might be one of those investments that is an excellent investment," he said. "They would need the authority to divest themselves from that if they were going to violate the prudent investor rule." Sen. Jerry Klein, R-Fessenden, who opposed the bill, said it would be the first time a specific nation was listed in the North Dakota Century Code if the bill were to pass. "We've got investments around the country, and the federal government allows us to invest there," he said. "They have a list of countries where we can't invest, so that provides some of that comfort that we were looking for."
Yahoo
15-04-2025
- Business
- Yahoo
North Dakota Senate defeats bill that aimed to divest Legacy Fund from China
Sen. Jerry Klein, R-Fessenden, testifies against a bill that sought to authorize the State Investment Board to divest the Legacy Fund from Chinese investments. (Jeff Beach / North Dakota Monitor) The North Dakota Senate on Tuesday sank a bill that would have authorized the State Investment Board to divest from Legacy Fund holdings in companies headquartered in China. Under the 'prudent investor rule,' which governs trustees of investment portfolios, the board must prefer 'qualified investment firms and financial institutions with a presence in the state.' It cannot choose not to favor a company purely based on its home country. The bill, which failed by a 20-26 vote, would have updated this language to let the board voluntarily cut ties with Chinese businesses. Bill requiring Legacy Fund disclosure website sees support in North Dakota Legislature According to the North Dakota Retirement and Investment Office, that applies to only about $246 million of the $12 billion in the fund. That equates to about 2.1% Primary sponsor Rep. Bernie Satrom, R-Jamestown, has said North Dakota should do away with holdings in Chinese companies due to human rights abuses committed by the Chinese Communist Party, as well as concerns that China's government is a national security threat to the United States. Sen. Sean Cleary, R-Bismarck, said he supported the bill because it addresses these problems while still giving the State Investment Board flexibility over the fund's investments. 'Our own intelligence agency has identified that there are significant threats that come from the Chinese Communist Party,' he said on the Senate floor. North Dakota Legacy Fund takes big hit amid stock market volatility Critics of the bill said it would hamper growth of the Legacy Fund by discouraging investment in an entire country's market. Sen. Jerry Klein, R-Fessenden, said it's unusual for North Dakota to single out countries in state law. The closest comparison may be a 2023 law the North Dakota Legislature adopted prohibiting investment practices that would result in a boycott of Israel. Klein said many Chinese companies are good-faith business partners to the United States and shouldn't be penalized just because of where they're located. The Retirement and Investment Board took a neutral stance on the bill. Earlier this month, the Senate passed another Legacy Fund-related policy, House Bill 1319, which requires the Retirement and Investment Office to create a website detailing Legacy Fund holdings. Gov. Kelly Armstrong signed the bill into law last week. SUPPORT: YOU MAKE OUR WORK POSSIBLE SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Yahoo
31-03-2025
- Business
- Yahoo
Amended bill related to RIO incentive compensation program gets do-pass recommendation
Mar. 31—BISMARCK — A bill related to an incentive compensation program for the North Dakota Retirement and Investment Office got a do-pass recommendation on a 14-2 vote from the Senate Appropriations Committee on Friday, March 28, after it was amended to have the agency report to the appropriations committees during the next legislative session regarding its plan to internally manage 50% of the investments under control of the State Investment Board. Sens. Cole Conley, R-Jamestown, and Sean Cleary, R-Bismarck, were opposed. Before the Senate Appropriations Committee hearing on Friday, its Human Resources Division failed to include an amendment to House Bill 1022 on a 2-3 vote that would have removed Retirement and Investment Office fiscal operations positions from being eligible for the incentive compensation program. The amendment also included a 75% cap on the bonus for the Retirement and Investment Office's incentive compensation program for each eligible full-time-equivalent investment position. The motion also included adding an amendment that would require the North Dakota Retirement and Investment Office to report to the appropriations committees during the legislative session in 2027 about its plan to internally manage investments. Cleary and Sen. Jeffery Magrum, R-Hazelton, voted to approve the amendments. Later during the hearing on HB 1022, the Senate Appropriations-Human Resources Division approved on a 4-1 vote adding the amendment that would require the North Dakota Retirement and Investment Office to report to the appropriations committees during the legislative session in 2027 about its plan to internally manage investments. Magrum was opposed. The Senate Appropriations-Human Resources Division also gave a do-pass recommendation on HB 1022 on a 3-2 vote, with the amendment requiring RIO staff to report to the Legislature in 2027. Cleary and Magrum were opposed. The incentive compensation program could allow the top two RIO officials to earn up to 100% of their salaries as incentive compensation, although officials in the office said that might not happen every year. RIO is responsible for coordinating the activities of the State Investment Board and the Teachers' Fund for Retirement, according to RIO's website. The State Investment Board has statutory responsibility for the investment program of several funds, including the Legacy Fund. The annual salaries for the RIO executive director and chief investment officer are $237,400 and $312,000, respectively. The documents of the incentive compensation program say it is designed to help attract and retain talented investment professionals. The program is also designed to help RIO earn the highest possible investment returns at a reasonable cost and at controlled levels of risk and to reward long-term investment performance. During the 2023 legislative session, the state Legislature authorized RIO to develop an incentive compensation program for its investment and fiscal operations positions necessary for the management of funds under the control of the State Investment Board. North Dakota Century Code Chapter 54-52.5-04 says that RIO may develop an incentive compensation program for full-time-equivalent investment and fiscal operations positions necessary for the management of the investment of funds under the control of the State Investment Board. The State Investment Board must approve annually the provisions of the program. Cleary said one of his amendments to HB 1022 would remove "fiscal operations" from North Dakota Century Code Chapter 54-52.5.04. He said the incentive compensation program is an investment performance program for employees making the investments. "I don't know if the plan is to have the executive director as part of this," he said. "It looks like the plan they proposed in the interim is, but that also seems odd to me." Cleary told The Jamestown Sun that fiscal positions aren't directly involved in making the investment decisions. He said it's odd for fiscal positions to be eligible for the incentive compensation program that's designed to provide a bonus based on investment performance. "I think common sense here dictates that the bonus for investment performance should be given to folks making the investments," he said. "Whether it's executive director or fiscal staff ... I don't think the labor market is different on how we need to compensate compared to someone who's an investment analyst — there's a lot of different pressures there — from how they're being compensated in the private sector and in other public sector agencies. But, the fiscal staff and the director, those are positions that to me it just doesn't make as much sense to have them be part of this investment bonus structure, and I don't think anyone really had that in mind when we passed it two years ago." Another amendment by Cleary — which was not approved to be added to HB 1022 — included capping the maximum incentives at 75% of an investment position's salary for the incentive compensation program. "There is a bill in the House to get rid of this program entirely," Cleary said at the Senate Appropriations-Human Resources Division hearing. "I think I said when I introduced this amendment, that seems short-sighted. We are asking them to do more; they need to pay competitively to do that. Part of that is the bonus structure. "I don't want to speak for the subcommittee or the Senate, but I don't know if folks understood that that meant that there's going to be bonuses up to 100% of the salary," he said. "So when you see that, it seems like it could be a lot, and that's where the 75% of the cap came from." Cleary told The Jamestown Sun that the 75% cap for a bonus through the incentive compensation program was a guide rail into how high the maximum bonuses should go. "I think the way I landed on that number is it seems like a 100% bonus just seems pretty excessive in public-sector employment and so I thought 75%, that's still a pretty generous bonus on top of their base salary," he said. Cleary said he reviewed some testimony from the 2023 legislative session about RIO investment staff. "That's just now how it (incentive compensation program) was implemented during the interim (session)," he said. Sen. Kyle Davison, R-Fargo, said at the Senate Appropriations-Human Resources Division that he reviewed what he was involved in last session and what the Legislature's commitment was in looking at a new system to manage state investments. "It's what I committed to last session from a system change ... that I believe is the right system, and then when I look at the 75% of the base and the pay on the amendment, that wasn't what I agreed to previously," he said, referring to RIO's budget. "I think the State Investment Board has done their due diligence. I think RIO has done their due diligence on what this pay should be. I think we should let the process evolve over a session over the next couple of years before we meet again and monitor it." Jodi Smith, RIO interim executive director, told the Senate Appropriations Committee that Verus Advisory Inc. sets the benchmark for the incentive compensation program before the fiscal year begins. "If we are one basis point above, that's where you get the minimum compensation," she said. "If we are 25 basis above, that's where you get that middle ground. Then we would have to get to 50 basis points before you got that maximum." She said using the current benchmark and $23 billion in assets, RIO would need to bring a benefit of more than $19 million above the benchmark before the minimum bonus for the program is instituted. "That incentive payout then by gaining $20 million to the state is $205,000 so to me that's a pretty nominal number when we are gaining the state that $20 million," Smith said. "In order to gain up to that maximum amount, which is what the policy is written at today, we'd have to earn the state $132 million above that benchmark. That payout then is looking at about $2 million based off of our current pay scale of our employees." She said anyone eligible for an incentive bonus is not eligible for a performance bonus. Smith also said RIO determined it wanted the authority to design and implement an incentive compensation program during the last legislative session, "which is kind of stepping outside what most other agencies are able to do." "Then they wanted the time for the board to write a policy," she said. Conley told The Jamestown Sun that he is opposed to the top two people in RIO potentially receiving 100% of their salary as a bonus. "Those same two people were the ones that could set the threshold, and they set it at a half a percent," he said. "I think the people that have the most to gain shouldn't be the ones setting the threshold on how they get paid." He added that RIO has hired an independent consultant to set the benchmarks, which "is probably a good thing." Smith wasn't the executive director when the incentive compensation program was approved. Jan Murth, former RIO executive director, resigned from her position, effective Jan. 3. The incentive compensation program provides incentive compensation as a percentage of regular compensation, with 80% of the incentive compensation based on the financial performance of the investments and 20% based on individual goals, according to the Retirement and Investment Office's budget No. 190 for SB 2022. If the three-year rolling average return of the investments exceeds the benchmark return by 0.5%, 100% of the incentive compensation based on financial performance is available to the employees, the document says. The maximum incentives as a percentage of regular compensation are as follows: * 100% for the chief investment officer and executive director * 90% for the deputy chief investment officer * 75% for the chief risk officer, senior investment officers and portfolio managers * 60% for the chief financial officer * 50% for investment officers, risk officers and accounting managers * 25% for senior investment accountants and investment accountants Plan participation is determined based on employment status and the executive director's assessment of the position's impact on the Retirement and Investment Office's overall investment performance.
Yahoo
17-03-2025
- Business
- Yahoo
Bill to mandate state investment in gold, silver fails in North Dakota Senate
Sen. Jerry Klein, R-Fessenden, assistant majority leader, speaks on the Senate floor during the organizational session on Dec. 4, 2024. (Michael Achterling/North Dakota Monitor) The Senate voted down a bill that would have required the state treasurer to invest 1% of the state treasury in gold and silver bullion. House Bill 1183, sponsored by Rep. Daniel Johnston, R-Kathryn, failed on a 34-13 vote Monday. Sen. Jerry Klein, R-Fessenden, said while the bill had good intentions, the state treasurer is 'just handling the checkbook.' He said the state's general fund, and other funds controlled by the state treasurer, are the wrong funds to be used for investing. 'If you buy gold and silver, you buy it as an investment that you will hold in hopes of increasing in value,' Klein said. 'You don't convert that monthly so you can make your house payment, or your car payment, or everyday expenses. You need some liquidity.' Senate committee hears bill mandating gold, silver investments by North Dakota treasurer Klein added the State Investment Board and Department of Trust Lands can already make investments into precious metals, if they choose. The Bank of North Dakota would also need about $2 million to renovate its vault to accommodate the metals which could weigh in the tons, Klein said. He added the housing of precious metals would create new ongoing costs for managing the state's supply. Sen. Dale Patten, R-Watford City, said the gold and silver investments are not part of the state's comprehensive investment plan and voted against the measure. During the public hearing for the bill, Johnston told lawmakers that other nations are moving away from the U.S. dollar as a foundational currency and wanted the state to control something that would be independent of inflationary pressures. Johnston also pointed out that the U.S. dollar loses 2% to 3% of its value every year while gold has appreciated greatly in recent decades. SUPPORT: YOU MAKE OUR WORK POSSIBLE SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Yahoo
10-02-2025
- Business
- Yahoo
Bill to repeal RIO incentive compensation program gets do not pass recommendation
Feb. 10—JAMESTOWN — The North Dakota House Government and Veterans Affairs Committee gave a do not pass recommendation on Thursday, Feb. 6, on a bill that would repeal a section in the North Dakota Century code related to an incentive compensation plan for the state Retirement and Investment Office. Rep. Bernie Satrom, R-Jamestown, vice chairman of the House and Government and Veterans Affairs Committee, was the lone dissenting vote. Satrom and Reps. Mitch Ostlie, both R-Jamestown, and Mike Beltz, R-Hillsboro, introduced House Bill 1348, which would also amend North Dakota Century Code 54-44.3-20 by removing investment and fiscal operations positions of the Retirement and Investment Office from being exempt from the state employee classification system. The passage of HB 1348 would repeal an incentive compensation program that could allow the top officials in the North Dakota Retirement and Investment Office (RIO) to earn up to 100% of their salaries as incentive compensation although RIO officials said that might not happen every year. The annual salaries for the RIO executive director and chief investment officer are $237,400 and $312,000, respectively. Rep. Vicky Steiner, R-Dickinson, said she appreciates Ostlie for bringing HB 1348 forward. "I think when something goes through budget section and that is actually our own problem is being legislators is it's very difficult to find out the budget section heard this and what it meant and doesn't get back to all of us and you are thinking there are four people involved and not 20," she said. "But when you hear the explanation today, it's pretty obvious that it's being vetted very well. So I feel comfortable that it's being vetted." Rep. Austen Schauer, R-West Fargo, chairman of the Government and Veterans Affairs Committee, said there was a lack of communication between legislators about the development of the incentive compensation program. He said he wasn't sure if the incentive compensation program should be repealed or opened up for further review. The documents of the incentive compensation program say it is designed to help attract and retain talented investment professionals. The program is also designed to help RIO earn the highest possible investment returns at a reasonable cost and at controlled levels of risk and rewards long-term investment performance. During the 2023 legislative session, the state Legislature authorized the Retirement and Investment Office to develop an incentive compensation program for its investment and fiscal operations positions necessary for the management of funds under the control of the State Investment Board. North Dakota Century Code Chapter 54-52.5 says that the North Dakota Retirement and Investment Office may develop an incentive compensation program for full-time-equivalent investment and fiscal operations positions necessary for the management of the investment of funds under the control of the State Investment Board. The State Investment Board must approve annually the provisions of the program. Nineteen of the 34 RIO employees are eligible for the incentive compensation program, said Jodi Smith, RIO interim executive director. The incentive compensation program provides incentive compensation as a percentage of regular compensation with 80% of the incentive compensation based on the financial performance of the investments and 20% based on individual goals, according to the Retirement and Investment Office's budget No. 190 for SB 2022. If the three-year rolling average return of the investments exceeds the benchmark return by 0.5%, 100% of the incentive compensation based on financial performance is available to the employees, the document says. The maximum incentives as a percentage of regular compensation are as follows: * 100% for the chief investment officer and executive director * 90% for the deputy chief investment officer * 75% for the chief risk officer, senior investment officers, and portfolio managers * 60% for the chief financial officer * 50% for investment officers, risk officers and accounting managers * 25% for senior investment accountants and investment accountants Plan participation is determined based on employment status and the executive director's assessment of the position's impact on the Retirement and Investment Office's overall investment performance. "The 100% down to 25% seems to be a little bit max, but we don't really know the going rate ... ," Schauer said. "So I don't know if it's like we just cut it out completely, or we just open the door for further review on what we're doing." Those who oppose HB 1348 say the incentive compensation program was needed to recruit and retain employees for RIO and to incentivize them to perform on their investments. "In their industry, that's what they're accustomed to," Smith said. "That's how they're set up a lot of times in their industry to perform as they have that base salary, and then they get that incentive compensation. So from that perspective, for those individuals, they are under market." She said RIO could lose employees to other states that have a higher base salary for similar positions. Having internal investment managers saves RIO about $17 million per year for internally managing 15% of the state's assets, Smith said. Ostlie, who spoke in favor of the bill, said the incentive compensation program that was approved by the State Investment Board was different from what he recalled would happen. "When I asked many other legislators for clarification of this, they couldn't remember this either and/or they said that it probably should have maybe been vetted just a little bit more," he said. Steiner said she agrees with Ostlie and was also surprised about the details of the incentive compensation program. "I didn't realize that it was that extensive," she said. "I remember when we talked about it, I thought it was just going to be a couple of fund managers that we had to incentivize just like the private market, and it's much larger than that, so it's definitely a concern." Rep. Keith Kempenich, R-Bowman, who spoke against HB 1348, said the communication between legislators about the incentive compensation program could have been better. "I'm not going to argue that point," he said. Ostlie said the incentive compensation program should be repealed and replaced with a new one that is vetted by the Legislature. He said Gov. Kelly Armstrong is now the new chair the State Investment Board. "It would allow their input into this process, and then also the full legislative body here would have maybe a little more input than what we had the last time or if nothing changes, at least we are a little bit more aware of what we did," he said. Smith said the State Investment Board should get an opportunity to fix the incentive compensation program. She said Armstrong asked for a review of the program. "Allow them that opportunity because you can see the State Investment Board, and this is in the policy, reserves the right to modify, terminate and or rescind any or all of the compensation schedules, provisions, policies and procedures contained in this and supporting documents at any time," she said. Ostlie said about 20 positions that were declassified are eligible for the incentive compensation program, including the executive director and chief investment officer. "I do not believe that all of these other classes of employees were intended by the last Legislature to be on this new comp plan," he said. He said he understands the need to declassify some RIO employees from the state employee classification system. "Everybody I talked to thought the list was expanded quite a bit larger than what was intended," he said. Section 3 of SB 2022 during the 2023 legislative session amended North Dakota Century Code Section 54-44.3-20 to exempt investment and fiscal operations positions of the Retirement and Investment Office staff from the state employee classification system. Smith said the original intent was to reclassify those employees and put them at a higher level of classification. "They were denied those reclassifications to be able to bring their salary levels up because they have a very specialized skill set within the agency," she said. "So the agency's response to being able to bring on the team members at the level that we need to bring them on then was to unclassify them." State Treasurer Thomas Beadle, who spoke against the bill, said there was opposition to the incentive compensation program on the State Investment Board when it got approved. "Primarily a couple of other agency heads to serve on the state investment board," he said. "They were concerned that they might lose fiscal staff who might think that this is more attractive and they want to jump shift to a different agency, so they dissented in their votes." The State Investment Board approved in a 10-3 vote the incentive compensation program in February. Board members Adam Miller, Joe Morrissette, who is the director for the North Dakota Office of Management and Budget, and Susan Sisk were opposed. The incentive compensation plan allows more than just the investment advisers to be eligible for the plan and includes the executive director and the fiscal team of the Retirement and Investment Office, Morrissette told The Jamestown Sun in November. All employees in RIO are not eligible for the plan, he said. He also told The Sun that he was against the structure of the bonus system because the plan awards a bonus at one basis point of performance that exceeds the benchmark. "A basis point is a 100th of a percent," he said. "That seemed like too small of a margin for me. I felt like there should be a larger gap between the benchmark and what our performance is before we started awarding bonuses."
