That puts New Mexico third in the nation after Alaska and Texas in total fund balances compared with the 11 states that have sovereign wealth funds, Moise said at a business breakfast organized by the University of New Mexico’s Anderson School of Management.
As a result, the SIC will distribute nearly $900 million to the state for the next fiscal year that starts in July to help finance public schools, universities, hospitals and other agencies. That’s up from about $300 million distributed 20 years ago.
“These funds are working for you,” Moise told event participants. “…By 2021, we expect the funds to produce about $1 billion per year for New Mexico residents and tax payers.”
Prudent management and investment policies have put the fund on a healthy growth trajectory, Moise said. That includes major restructuring since 2010 in how the SIC makes decisions, following pay-to-play scandals under former administrators, who concentrated decision-making authority in their own hands and allowed placement agents paid by private funds to steer SIC money to those funds.
Today, all decisions are made by the entire 11-member council based on apolitical considerations focused on the best returns, with thorough vetting of all fund managers doing business with the SIC, Moise said.
The SIC has also restructured the investment portfolio to significantly reduce its previous concentration in volatile stocks and bonds and direct more money to longer-term assets, such as real estate, that offer more stability.
“That allows us to still take solid advantage of stocks and bonds when the market is up while reducing our risk on the downside,” SIC member Harold Lavender, who attended the event, told the Journal. “We can’t catch all of the up markets, but we don’t catch all of the down ones either. It allows us to withstand market gyrations.”
The land grant fund, which receives income generated by activity on state trust lands, now stands at $15.8 billion, accounting for 73 percent of total funds. The Severance Tax Permanent Fund, which draws its money from taxes on oil and gas production, currently at $4.81 million and accounts for 22 percent. The rest is divided among a tobacco settlement and a water fund and SIC management of funds from other government agencies.
Unlike the land grant fund, the severance tax fund is in poor shape, with far more money being distributed annually to the state than intended under original statutes, which called for 50 percent of all income to remain in the fund each year. But statutory changes by the Legislature since 1999 have reduced that to just 10 percent, Moise said.
The severance tax fund is contributing a fairly steady $200 million per year to the state budget. But net inflows back to fund are down sharply in recent years. There was a zero net inflow in two of the last seven years, with another zero-contribution expected for 2017 as well, Moise said.