Message From the State Investment Officer

 “To protect and grow the state’s permanent endowment funds for current and future generations, through prudent, professional investment management.”

This is the mission of the New Mexico State Investment Council (SIC), and part of an overall Mission Vision Values statement adopted by SIC staff and endorsed by the Council.

Steve Moise, New Mexico State Investment Officer

New Mexico is proud of the fact that we have one of the largest sovereign wealth funds (permanent endowments) in the United States – $35 billion – and one of the larger global funds. Thanks to the forward planning of our legislature in 1958, the SIC annually contributes, on average, 15 percent of our state’s operating budget – saving each New Mexico family more than $1,500 in taxes each year.  With consistent investment performance and our annual receipts from natural resource revenues and land grant-related revenues, we hope to be able to consistently maintain or increase our annual contributions to the state budget, to education, and to the beneficiaries of the funds we manage.

By investing prudently over time, we will enable future generations to enjoy the same or a greater level of benefits compared to what we currently provide to our citizens. Historic inflows to the Land Grand Permanent Fund and ongoing efforts to restructure Permanent Fund investments have enabled the Council to grow its assets by more than $21 billion since April, 2010.

The Council has adopted new investment strategies that diversify our assets, and which will help to reduce overall volatility of the portfolio. Our current 40 percent stock position is about 15 percent less than it was 10 years ago. We have increased allocations to income-producing “real assets” and private equity. Through our New Mexico Private Equity Program, the SIC indirectly co-invests in technology, health care, software, aviation and energy companies, among others. This is accomplished by the Council investing with both national and regional venture capital funds, as well as top local “emerging managers” that are actively sourcing investment opportunities in New Mexico.  The Council’s efforts to invest and support New Mexico start-ups and entrepreneurs should help lay a solid foundation for future growth and commercialization of new technologies in our state.

In March 2020, the Council was quick to take action to support New Mexico businesses significantly impacted by the COVID-19 pandemic, authorizing a $100-million low-cost loan program for qualified borrowers.  These loans, in tandem with small business loans from the Severance Tax Permanent Fund facilitated by the Small Business Investment Corporation (SBIC), loans authorized by the Small Business Recovery Act and federal loans and grants, are helping our state’s economic recovery. The Legislature designated $500 million from the Severance Tax Permanent Fund for use by the NM Finance Authority-administered NM Small Business Recovery Loan Fund for small business loans and to assist local governments in connection with the COVID crisis.

The following is a summary of some of the most impactful highlights from 2021:

Staff has worked remotely since mid-March. IT staff facilitated a seamless transition from staff’s in-house operating model to our remote working model and has consistently monitored and fulfilled related needs.

During 2021, assets under management (AUM) increased by a record $4 billion. The Land Grant
and Severance Tax funds distributed ~$1.07B to the state and our beneficiaries in FY21 and the funds will distribute a combined $1.15B during FY22.  Given the substantial growth of the permanent funds, the LGPF alone is now expected to distribute more than $1 billion to public schools and other beneficiaries in FY23, while the STPF will also reach record distribution levels above a quarter billion dollars to the state’s general fund.  The combined permanent fund distributions will exceed $1.25 billion for the first time in fiscal 2023.

The SIC invested or committed ~$1.6 billion across two dozen Council-endorsed funds in 2021, targeting private equity, venture capital, real estate, real assets (infrastructure, renewable energy, etc.) and credit/structured debt strategies in addition to traditional stock and bond investing.

For the most recent quarterly reporting period ending 12/31/21, the Land Grant Permanent Fund, the SIC’s flagship fund, earned (net of fees): 1 yr 17.06%; 3 yrs 13.49%; 5 yrs 10.57%; 7 yrs 8.55%; and 10 yrs 9.65%.  The one-year return was slightly above the LGPF benchmark, while other time periods lagged the fund’s benchmark by 0.4% or less.  Performance versus market benchmarks and versus peer returns will fluctuate from period-end to period-end, but over time we seek to outperform market benchmarks as a matter of investment policy, and we work to position our investments to perform in-line with or better than peers.

The Council completed periodic investment-related studies including: our FY21 Annual Investment Plan, Real Estate Structure Study, Fixed Income Structure Study, Tax Stabilization Reserve Asset Allocation, updated General Investment Policy, Public Equity Domestic Equity Structure Study, Public Equity International Equity Structure Study, and Early Childhood Education Fund Asset Allocation.  The Council also adopted an Environmental, Social, and Governance (“ESG”) Policy to establish guidelines related to those factors that are to be considered by the SIC and its staff when investing.

Our accounting staff successfully completed the annual external audit, again resulting in an unmodified opinion, as we have consistently achieved over the last 10 years.  That staff also led our effort to recover over $3M in tax reclaims.

Staff prepared and delivered presentations to legislative committees including the Investments & Pensions Oversight Committee, the House Appropriations and Finance Committee, and the Legislative Finance Committee.  We continued efforts to educate stakeholders regarding the importance and operation of the permanent funds.

Our legal department performed legal-related diligence, negotiated contracts which facilitated implementation of new fund investments and oversaw other legal and compliance-related matters. 

We managed ~$1.81 billion for 23 NM government-related clients, providing them with substantially lower investment costs than they would otherwise incur.  Several new government entities have also begun the process of establishing new long-term investment accounts by participating in the SIC’s various investment pools.  Since April 2011, SIC clients have grown their investment assets (through both positive returns and new contributions) by more than $1.27 billion.

The legislature has similarly increased the size and scope of funds it has placed in the Council’s care, dedicating three new funds to the SIC in recent years: the Tax Stabilization Reserve, Early Childhood Education and Rural Libraries funds.  These funds have balances of $1.85B, $314M and $3M, respectively, as of December 31, 2021.

The following are as of 12/31/21:

I am honored to have the opportunity to serve the SIC and our citizens in coordinating the operations of the State Investment Office, and the stewardship of our funds.

Our Council and staff are committed to fulfilling our fiduciary responsibilities in a professional, ethical and respectable manner.  We strive to continue to merit the trust of our stakeholders.  Thank you for your interest in and support of our efforts.

We invite you to read more about the history of the Permanent Funds and the State Investment Council in our 60 Years | Anniversary Report 2018 and 2021 Report to Stakeholders.

Steven K. Moise
State Investment Officer
February, 2022