North Dakota Legacy Fund posts -10.1% net return for fiscal year

North Dakota Legacy Fund, Bismarck, posted a net return of -10.1% for the fiscal year ended June 30.

The $7.9 billion sovereign wealth fund’s return exceeded its policy benchmark return of -10.5% for the period, according to a performance report on the North Dakota Retirement and Investment Office’s website. The fund returned a net 42.4% for the fiscal year ended June 30, 2021.

For the three and five years ended June 30, the fund returned an annualized net 4.8% and 5.4%, respectively, above the respective benchmarks of 4.1% and 5%.

The legacy fund, created by a state constitutional amendment in 2010, has received 30% of oil and gas gross production and oil extraction taxes on oil produced in the state after June 30, 2011. The North Dakota State Investment Board manages its assets.

The latest fiscal-year returns for the legacy fund reflect a challenging return environment for public equities and fixed income during the past year.

For the year ended June 30, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -13.9% and -10.3%, respectively, in sharp contrast to returns of 44.2% and 4.6% for the year ended June 30, 2021.

The legacy fund was 100% short-term fixed income from its inception through 2013, when the State Investment Board first approved adding equities and real estate to its portfolio. The fund has since added allocations to diversified real assets, which consists mostly of infrastructure investments and one inflation-linked fixed-income portfolio, and private equity.

The fund’s top-performing asset class for the most recent period was global real estate, which chalked up a net return of 32.1% (above its 26.8% benchmark), followed by diversified real assets at a net 0.8% (below its 4.4% benchmark); global fixed income, a net -9.8% (-10.3%); domestic equities, -13.7% (-16.4%); and international equities, -20.8% (-16.8%).

As of June 30, the actual allocation was 35.8% global fixed income, 28.4% domestic equities, 17.6% international equities, 10.9% diversified real assets, 6% global real estate, 0.7% cash equivalents and 0.6% private equity.