Sunday, December 24, 2017

Is ITARA (HR 812) an Opportunity to Create TSWFs?

TSW Community:

For those of you looking to launch an Tribal Sovereign Wealth Fund (TSWF), but do not have the benefit of geography to spur significant natural resource or gaming development as your catalyst, this could be an opportunity.

I'm surprised I haven't heard more about this in the investment community, but I wanted to make you all aware of a law passed last year known as ITARA, or the Indian Trust Asset Reform Act. The two primary nuggets in this Act were:

  1. TITLE II. The "Indian Trust Asset Management Demonstration Project" under the Office of the Special Trustee (OST) and
  2. TITLE III. The organized termination of the OST itself (don't be alarmed, the OST was created as a temporary solution).

If you're not familiar with the OST, it basically (oversimplifying here) manages about $5B in financial assets on behalf of individuals and tribes, in addition to overseeing surface/subsurface rights across the country (encompassing about 10% of the US Oil & Gas reserves, by some accounts). The Special Trustee position is currently vacant since Vince Logan stepped down in January 2017 (Jerold Gildner is current serving as Acting Special Trustee).

What is this demonstration project? Well, it authorizes and encourages tribes that have assets under management by the OST to, in essence, start managing their own assets. Essentially, it creates a pathway for OST tribes to establish their own Tribal Sovereign Wealth Funds using these assets. This is a huge opportunity, as the OST assets are governed by an external investment policy that is extremely conservative, and therefore provide little opportunity in asset growth over time.

Oh yeah, and Tribal Consultation on ITARA section 304 (transition plan for the termination of the OST) is happening now. You have until January 18, 2018 to get your comments in.

One last thing - if you're a tribe with OST assets, I'd like to hear from you on how you're thinking through this opportunity. Please reach out directly or leave a comment!

In Perpetuity,


H.R. 812 — 114th Congress (2015-2016)

Public Law No: 114-178 (06/22/2016)

(This measure has not been amended since it was reported to the House on February 24, 2016. The summary of that version is repeated here.)
Indian Trust Asset Reform Act
(Sec. 102) This bill reaffirms the federal government's duty to promote tribal self-determination.
Indian Trust Asset Management Demonstration Project Act of 2016
(Sec. 203) The Department of the Interior must establish an Indian trust asset management demonstration project that allows tribes to propose Indian trust asset management plans. To be approved by Interior, these plans must establish objectives and priorities for trust assets and allocate sufficient funding for asset management to meet the objectives and priorities.
(Sec. 205) Interior may approve a trust asset management plan that allows the Indian tribe to enter into, approve, and carry out a surface leasing transaction or forest land management activity without Interior's approval, under certain conditions.
The United States is not liable for losses that result from: (1) a forest land management activity or lease under a trust asset management plan, or (2) management standards under a trust asset management plan that are less-stringent than Interior otherwise requires.
(Sec. 303) Interior may establish an Under Secretary for Indian Affairs who is to report directly to the Secretary of the Interior and coordinate with the Office of the Special Trustee for American Indians (OST) to ensure an orderly transition of the functions of the OST to an agency or bureau within Interior. 
(Sec. 304) Interior must prepare a transition plan and timetable for the termination of the OST.
(Sec. 305) Appraisals and valuations of Indian trust property must be administered by a single administrative entity within Interior.
Interior must establish minimum qualifications for individuals to prepare appraisals and valuations of Indian trust property. An appraisal or valuation by a qualified person is considered final without being reviewed or approved by Interior.
(Sec. 306) Representatives of entities that advise Interior on Indian program budget or funding issues may make recommendations regarding the use of savings realized from the transfer of the functions of the OST.

Saturday, December 23, 2017

Onefire (Creek Nation) Values Portfolio at $23.5M

TSW Community:

In case you missed it, Onefire Holding Company gave an update to the the Muscogee (Creek) Nation earlier this year, communicating a holding value of their portfolio of $23.5M.

Onefire has a portfolio largely composed of private market investments (real estate, private equity, private debt), and typically holds asset values at cost until they have a definitive value change such as a sale, additional investment round, or formal third party valuation. 

I'll write something on the j-curve, and the related accounting/communications implications in a future post. In short, however, is when reaching for higher average long-term returns in private market investments, there may be lower short term returns (or even losses due to management and operational fees) to achieve this performance.

In addition to the private markets aspect of their performance, Onefire has also inherited a number of legacy businesses which had been started or acquired over the past several years, including a mixed use real estate asset and a construction material business. This includes an aspect of local investment and job creation (MCN has a population of >80,000), which adds more levels of complexity and challenge around communication and shareholder relations.

Kudos to Mike Payne and the Onefire team.

NOTE: Onefire's asset value of $23.5M only represents a small portion of the tribe's overall asset base. Onefire is focused on growth whereas other pools of assets may be focused on stability or jobs - see more about that in this post.

In Perpetuity,


Onefire Values Portfolio at $23.5 Million

March 3, 2017

“And I think the ongoing performance of that dividend, in which I imagine would be public knowledge, will be a good indicator of the type of performance that Onefire is doing.” –Onefire CEO Mike Payne

Jessica McBride/Media Coordinator

Business to make contribution back to MCN in 2017

JENKS, Okla. — According to a financial report provided by Onefire Holding Company to Mvskoke Media, the Muscogee (Creek) Nation-owned economic development entity’s portfolio value as of Feb. 17 was $23.5 million.

The full report can be viewed below.

The value decreased from $23.9 million as of Dec. 31, 2015 per the report provided last year.

Onefire CEO Mike Payne stated by email that the company only documents an increase in equity value on the report if a recent equity event with the company occurs, such as selling stock.

‘For audit reasons we can not inflate the value on our books without an equity transaction or formal valuation to support it,’ he said.

Payne said in an interview with Mvskoke Media that Onefire had a good year in 2016.

“We executed on a lot of what we hoped to do. We closed on new investments in a lot of diversified industries,” he said.

The company invested in the aerospace maintenance and repair, electrical and construction industries.

Payne said in 2016, Onefire reviewed around 85 investment opportunities, valued at approximately $170 million. He said the company closed on five investments in 2016, and will look at two-three more in the first half of 2017.

“The portfolio is performing very well,” he said. “All those companies are doing for the most part, what we’ve expected them to do.”

He said the company has invested in a total of 16 enterprises including RiverWalk and Edo Building Systems, formerly the SIPs plant operated by MCN.

He said the company saw the opening of FlyingTee and announced new tenants making their home at RiverWalk.

“Things are really moving in the right direction and set up for a great ’17,” Payne said.

Payne said that because of FlyingTee, RiverWalk has increased from 36 percent occupancy to 93 percent and that the value of the property has increased.

RiverWalk announced in July 2016 that Andolini’s Pizzeria would be opening a location at the development. The restaurant is expected to open this year.

He said an announcement is expected soon regarding a new RiverWalk tenant.

Payne said Edo Building Systems is also performing well and growing.

“We’ve diversified it from just producing SIPs panels to basically providing design, manufacturing and build capabilities,” he said.

Edo has expanded to offer commercial as well as residential services.
Onefire also operates a CNG fuel station located on Highway 75 south of Glenpool.

“We had a lot of hurdles to get over to get operational, but right from the get-go, from the time we turned the pumps on, there’s been great traffic coming through and filling up,” Payne said.

He said Onefire is ramping up branding and marketing efforts for the facility, including a loyalty program for using the fuel station and taking on corporate accounts.

Payne described the blend of investments Onefire considers.

Onefire invests funds with equity growth investments, and does not expect an immediate financial return.

“The value of the money that we put in there is going to grow, and grow, and grow exponentially to the point when there’s a transaction on that company at a later date, our money has grown two times, three times, four times, five times its value,” Payne said. “In the meantime, that money is in that company working and growing itself.”

He said Onefire could possibly see a return on a couple of the equity growth investments it has made when it exits the investments this year.

Other investments are income based, in which Onefire receives monthly, quarterly or annual distributions from specific investments.

A third type of investment Onefire considers is a blend of the previous two, where the company would see equity growth and income in the investment.

“So I think if you look at Onefire’s operations versus that of gaming or even particularly like MNBE (Muscogee Nation Business Enterprise) and MI (Muscogee International) and so forth, where those are operating entities that are making an investment in a piece of equipment or a gaming machine and then taking that and immediately producing revenue,” Payne said.

He said the difference with Onefire is that they are investing in another company, and will gain revenue off of another entity’s operations.

Payne said 2017 will be a transition year for Onefire, as they move towards operations and enhancing the portfolio that the company worked to build and invest in over the previous three years.

He also expects it to be profitable for the business.

“…Helping enhance the portfolio companies that we have maybe a minority investment in and starting to help leverage the tribal ownership and bring some of those benefits to the Nation, bring benefits within the portfolio to each other and just try to expand kind of our shared service model to the portfolio,” he said.

Payne said Onefire is expecting to return a dividend to the Nation in 2017.

“And I think the ongoing performance of that dividend, in which I imagine would be public knowledge, will be a good indicator of the type of performance that Onefire is doing,” he said.

Payne said Onefire is working with MCN to determine the distribution amount.

“It will be a calculation based on our profitability and whatever that calculation comes back to will be what is returned to the tribe,” he said.

Payne said the goal of the operation is to generate wealth for the Nation and in turn, the citizens.

“We feel like every single citizen absolutely is a stakeholder in this and we want them to be proud of our portfolio,” he said. “And I think as things continue to grow and become more visible they will be.”

Onefire reports financial information on a quarterly basis to the National Council Business, Finance and Justice Committee and the Executive Branch.

The report is conducted in executive session, however citizens are able to stay and hear each business entity’s status. Mvskoke Media is unable to report during Council executive sessions.

“A lot of that information is as you might imagine, highly confidential to the portfolio, to potential tenants at the RiverWalk… but we try to keep a very high level of transparency between us and those two reporting bodies,” Payne said.

He said many times the information deals with a person’s net worth, and information that could make the businesses less competitive in their industry by releasing the information.

Payne said sharing the profitability or investment information of the businesses Onefire has in its portfolio to the public could damage those businesses and in turn Onefire’s investments.

For more information about Onefire, visit their website.

Ho-Chunk Nation Establishes Sovereign Wealth Vehicle (Twelve Clans, Inc.)

TSW Community,

In case you missed it, in October 2016 the Ho-Chunk Nation (Wisconsin) passed legislation to capitalize their Tribal Sovereign Wealth Fund, Twelve Clans, Inc. via a commitment of $95M. The commitment is structured as $20M in the first fiscal year (ending June 2017) and $15M annually over the following five fiscal years.

Twelve Clans, Inc. is focused on wealth growth for for future generations (see commentary here).

Also, as with most TSWFs, Twelve Clans' asset is only a portion of the total assets of the tribe set aside for a specific objective. In this case, Twelve Clans is specifically focused on growth-oriented, private market investments whereas other pools of Ho-Chunk Nation capital are more focused on stability.

In Perpetuity,

Funds Approved for Twelve Clans to Begin Business Investments, Opportunities
By Ken Luchterhand
October 2016

Twelve Clans Inc. is off and running.

It received the boost they needed to get going on Tuesday, Oct. 18, when the Ho-Chunk Legislature approved an investment of $95 million to invest for the future of the Nation.

The commitment is $20 million for the first year and $15 million for each of the next five years.  

Twelve Clans Inc. is the first product of the Ho-Chunk Nation’s pursuit of separating business from government. The concept of Twelve Clans has been in progress and it is intended to diversify the revenue stream outside of gaming.

“The Ho-Chunk Nation has long known there was a need to diversify the revenue stream outside of gaming,” said Joanne Whiterabbit, treasurer for Twelve Clans. “The question the Nation had to answer was this — how could the Nation best utilize the resources of Ho-Chunk gaming to preserve our future as a Nation?  Answering this question was a challenging, long term process and through continued perseverance, Twelve Clans, Inc. was created.”

The group has prepared an investment strategy with public investments and transitions into a combination of private and public investments. It plans to invest in businesses as well as take advantage of the tax benefits available to it to create its own businesses, she said.

Passive investments (also referred to as public investments) are investments in which the funds are placed with corporations or funds that already exist and have a strong proven track record, Whiterabbit said. Private investments are more aggressive in their returns but have a greater risk.  Twelve Clans, Inc. will invest in both public and passive investments.  

“Investments in the gaming arena are not off the table, however, we will not compete with the Ho-Chunk Nation for gaming revenue,” Whiterabbit said. “There may be other opportunities that present themselves around the country or even internationally that we may consider.  These opportunities, like any other venture, will be vetted to ensure they meet Twelve Clans’ growth expectations and are consistent with its investment strategy.” 

To date, there are no other tribal corporations in existence like Twelve Clans, Inc.  Under the Charter, Twelve Clans operates separate and apart from the Nation. 

Twelve Clans’ primary goal is to build a future and secure the wealth of the Nation.  The Charter does not impose any social mandates, however, it is committed to funding Ho-Chunk-owned businesses and creating career opportunities with a Ho-Chunk preference, when it is appropriate and consistent with the Twelve Clans’ investment strategy.

For example, the Charter does not dictate what investment strategy Twelve Clans can utilize and it does not impose any or social mandates upon Twelve Clans, Inc. The Charter does require Twelve Clans to provide financial updates to the Ho-Chunk Nation, which is the sole owner of the corporation.  

The leadership of Twelve Clans was selected through an ad hoc search committee which solicited applications and conducted in-person interviews and all board members passed a background check prior to being selected, she said.

“The selection process initiated by the Ho-Chunk Nation will be continued as is mandated by our corporate charter,” Whiterabbit said. “Under the Charter, not less than two members of the board of directors must be enrolled members of the Ho-Chunk Nation. The Charter also dictates the skills that must be represented on the board. Our current vacancy is for a member of the Ho-Chunk Nation with law degree and business experience to complete the term for Sharice Davids.  We welcome referrals and recommendations at”

The step taken by the Legislature has started a whole new era in financial sovereignty. 

“The allocation of funds to Twelve Clans, Inc. from the Ho-Chunk Nation is a significant milestone,” Whiterabbit said.

Twelve Clans, Inc. will provide further updates and share its progress via its website ( and the Hocak Worak Newsletter. People may also email questions to Twelve Clans at



  • Disclaimer: Your's truly is on the board of directors of Twelve Clans, Inc.

Milken Institute Global Conference 2010

TSW Community:

The concept of Tribal Sovereign Wealth isn't new. I've personally been involved in conversations on this topic since about 2004-2005 and a group of us started using the term around 2007-2008.

In case you missed it, here is the video recording of panel from the Milken Institute Global Conference held in Los Angeles a number of us tribal investment professionals attended back in 2010.


  • Critical Mass. Even in 2010, Indian Country was starting to see a critical mass in assets ($27B revenue, set $10B EBITDA, annually).
  • Conservative Asset Allocation. Most assets have historically been distributed via dividends or held largely in cash or low yield securities.
  • Need Tribal Business Leaders. We need young Native Americans to pursue education and experience in quantitative areas - including economics, finance and business. (If you are a young person, student or know of talented young people - please contact me so I can help connect them with top schools and job opportunities)
  • Many Tribes are Single Resource Limited. Gaming, natural resources, etc.
  • Gaming is Limited. Tribal gaming (nationally) revenues reached saturation and flattened out starting in 2009.
  • Partnerships. Some large investment opportunities are unique to tribal entities but can only be accessed by working together.
  • Opportunity. There is significant opportunities to create additional wealth which are unique to tribes, especially around land and natural resources. In most cases, it takes outside or intertribal partnerships to realize these opportunities.

Slides from the panel can be found here.

In Perpetuity,


Native American Sovereign Wealth: The Impact on Human Capital
Monday, April 26, 2010

Shawn Baldwin, Chairman, Capital Management Group

Joseph Callahan, Assistant General Manager and Chief Financial Officer, River Rock Casino
David Greendeer, Executive Administrative Officer, Ho-Chunk Nation
Bill Lomax, President, Native American Finance Officers Association
Stephen Manydeeds, Division Chief, Indian Affairs, U.S. Department of the Interior
Chris McNeil Jr., President and CEO, Sealaska

Session Summary
Long marginalized, many Native American tribes across the country have amassed substantial assets in recent years. This panel takes an in-depth look at their sources of wealth, from gaming operations to lucrative land rights, and examine how these income streams can be used to improve infrastructure and educational opportunities. When significant wealth comes to a particular tribe, how does it alter the fabric of the community? The discussion also explores how tribes are preparing for the future as they attempt to diversify and invest to create independence.

Cherokee Nation Council Approves Creation of Sovereign Wealth Fund

TSW Community:

In case you missed it, the Cherokee Nation - the nation's largest sovereign tribal nation with more than 340,000 tribal citizens - recently approved the creation of their own sovereign wealth fund. This is in addition to their external, for-profit holding company which includes gaming and other diversified businesses.

The new fund will be organized under the government body (vs an external, independent institution), reporting to the appointed Treasurer of the Nation.  Capital has been committed in perpetuity via the Legislative Act, which includes earmarked dividends in the amount of 2% of Net Income from Nation-owned businesses, in addition to at least 50% of any windfall judgement or settlement of legal claims and other endowed funds.

The purpose looks to be around stability (see post on that here).

Kudos to Lacey Horn and the Cherokee Tribal Council.

In Perpetuity,


Council Approves Sovereign Wealth Fund

Reporter – @cp_sguthrie 
12/14/2017 08:15 AM

TAHLEQUAH, Okla. – Tribal Councilors on Dec. 11 passed an act that establishes the Cherokee Nation Sovereign Wealth Fund, a fund that is expected to “ensure the continuation of tribal operations and the general welfare of tribal citizens for future generations.”

Tribal Councilor Dick Lay spoke about the act’s importance during the Nov. 14 Rules Committee.

“So the idea was to take a small amount of funding from the businesses, set it aside for just extreme financial emergencies, and I think (Treasurer) Lacey (Horn) and her group have been working along the same lines, so we’re going to try and get those together,” Lay said.

Horn said creating a “permanent fund” was something she had wanted to do, and after working on Lay’s model with Controller Jamie Cole and Assistant Attorney General Chad Harsha they created an act to bring before Council.

“This act establishes a wealth fund, which shall be held by the treasurer in accordance with the act, and assets shall be maintained in an interest-bearing account or otherwise invested to promote growth of the fund's assets,” she said.

Within the fund, Horn said, there would be an Emergency Reserve Fund that would “receive a direct and continuing appropriation.”

“The Emergency Reserve Fund that receives the direct and continuing appropriation of 2 percent of the net income of our dividend-paying corporations as well as not less than 50 percent of funds received by the Cherokee Nation through judgment or settlement of legal claims,” she said. “That’s not to say that we couldn’t put 90 percent. That’s not to say that we couldn’t put some percent higher, but it’s just sort of setting that floor as to what’s going to go into this fund.”
The Motor Fuel Education Trust would also be moved to the new fund, which Horn confirmed would be an added “safety” measure.

“It had previously been collateralized in an interest-bearing CD that was used to borrow funds to build the Vinita (Health) Clinic, and that collateralization was removed whenever we entered into the loan with Bank of Oklahoma for the Tahlequah Joint Venture Project, and so these funds are…free and clear,” she said. “So this will take that fund, put that within the construct of the Cherokee Nation Sovereign Wealth Fund and allow us to invest that fund and continue to grow it.”

Horn said the fund could also have endowments, trusts or other funds incorporated within it periodically. “There’s often endowments, trusts that we receive from individuals that need to be invested for income-generating purposes, and this would be the perfect place to put (those) up underneath as well.”

Horn said all assets for the fund would be “reported and accounted” for separately and would support itself by not relying on any General Fund dollars.

“Expenses incurred and maintenance invested in the fund shall be paid for by the fund. So we won’t be utilizing any General Fund dollars to operate this fund it will be self-sustaining,” she said.

When it comes to distributing the fund’s money, there must be approval from two-thirds of the Tribal Council as well as the principal chief. According to the act, “a distribution from the Reserve Fund may only be made in the event that a financial emergency exists, the severity of which threatens the life, property or financial stability of the Nation.”

Also, according to the act, “a distribution from the Education Trust may only be made to satisfy a substantial need in higher education scholarships resulting from an unexpected funding loss or shortfall and distributions from all endowments, trusts or other funds held in the fund shall be made in accordance with any originating document or restriction applicable thereto, and subject to the appropriation laws of the Cherokee Nation.”

The act also notes that the fund “may not be used to finance or influence political activities.”

“I hope that you can see that we feel very strongly, very happy about this legislation that we put forward, and we hope the Tribal Council feels the same,” Horn said.

Councilors also passed an act relating to the adjustment of dividends known as the Corporation Emergency Dividend Reserve Fund Act, which is included within the Sovereign Wealth Fund.

Lay presented the act during the Oct. 26 Rules Committee meeting where he said it’s not an “original” idea but one that should be implemented as an “emergency fund.”

“It would cause the chief and the super majority of council to bring funding out of it to be used only for abject financial emergencies,” he said.

According to the act, for-profit corporations that the tribe is the “sole or majority shareholder” and are under CN law “shall issue a monthly cash dividend in the amount of 30 percent” from a “special quarterly dividend” they “deem” appropriate. An additional 5 percent is set aside for Contract Health services for citizens. According to the act, another 2 percent would “be set aside exclusively for an unanticipated and extraordinary revenue or funding loss that creates a budget shortfall where appropriation from any other source would be unavailable.”

To view the Sovereign Wealth Fund Act, click here.

To view the Corporation Emergency Dividend Reserve Fund Act, click here.

Why Tribal Sovereign Wealth?

TSW Community:

Many folks want to know, where do we start?

Likely the best place to start is to ask the question "why" your community may want or need a sovereign wealth entity. This is the most critical question, as it sets the objective and drives all future decisions around structure, strategies and processes. When setting up an institution that will last into perpetuity, this question is not trivial.

Two primary (and very different) reasons groups establish a vehicle for sovereign wealth are:

(1) Stabilization: (Current Obligations) We have one source of income (e.g., gaming, natural resources, gov't contracting) and think we should diversify in case something happens to negatively impact that income source. In this case, we expect to have an obligation to spend some of the money on an annual basis, so we want to make a bit more money from our investment returns so it can cover our spending needs.

(2) Growth: (Future Obligations) We are making money now but want to grow our wealth so it will be around for future generations. In this case, we do not necessarily need any money now, so we can invest (and re-invest) the money for the objective of growing the money to meet a future spending need.

If I were going to have an initial meeting around establishing a sovereign wealth fund, I would dedicate the first discussion to "why" we think we want to embark on this initiative. These two objectives are often not mutually exclusive for a given group, although some constituents may lean heavily towards one side or the other.

Some groups may find the need for both stabilization and growth, which is not unusual. If my group was wanting to go down both paths in parallel, it will be important to decide how the initial contributions of resources are to be allocated to each objective as the interaction between and management of these two objectives are not trivial (and likely a post, or series of their own).

I will also note, some tribal groups (especially those with a high population-to-income dynamic) are first and foremost concerned with creating jobs for their tribal members, which I'd largely group into economic development or impact investing - aka, program related investments (PRI), mission-related investments (MRI), socially responsible investments (SRI) or environmental, social and governance (ESG) investments. I'll cover this area in a future post.

In Perpetuity,



  • Indian Country has largely defined "diversification" as "not gaming", although I would argue that's a dangerous definition. More on that later.