Tuesday, March 10, 2020

Tribal Sovereign Wealth Peer Group

TSW Community,

At the RES event this year, I brought up (and received positive feedback on) the concept of a peer group for Tribal Sovereign Wealth leaders.

This would be an invitation-only group that meets periodically in a private setting, free of sponsors and vendors, where CEOs, CIOs, boards and investment committees can get to know one another and potentially share experiences and opportunities.

We have several leaders and leadership teams interested in participating, so we are planning an inaugural gathering later this year.

Would this be of interest to you and/or your leadership team? Let me know.

In Perpetuity,

Friday, February 14, 2020

Domestic Sovereign Wealth Funds & Standards of Living

TSW Community;

I came across a great overview and history of domestic, state-based sovereign wealth funds and how those funds can impact standards of living amongst the state citizens. Good benchmarks for tribal initiatives.

Original article below.

In Perpetuity,


12 FEB 2020
Richard E. Caroll

How U.S. Sovereign Wealth Funds Benefits their Citizens and Help Alleviate Poverty

There are more than 83 sovereign wealth funds (SWF) in the world. Unknown to many Americans is that in the United States there are 21 SWFs at the associate state level. A positive side effect of these sovereign wealth funds is that they assist in helping those in poverty escape the poverty trap. This is done in various ways, from direct cash disbursements, to assistance in K1 to K12 education as well as free college or trade school education at public colleges and universities and reducing state taxes allowing for greater disposable income for those at the poverty level.

While the best-known SWF is the Alaska Permanent Fund, the oldest SWF is in Texas. The Texas Permanent School Fund (PSF) which is administered by the Texas General Land Office (TLO), was authorized by the Texas Legislature in 1854. The seed money for the PSF was $2 million taken from the money paid to Texas by the federal government in return for Texas’ claimed territory in what are now parts of New Mexico, Oklahoma, and Colorado. The PSF was further augmented in 1953 when Congress passed the Submerged Land Act that relinquished to coastal states all rights of navigable waters within state boundaries. If the state, by law, had set a larger boundary prior to or at the time of admission to the Union, or if the boundary had been approved by Congress, then the larger boundary applied. The profits from the investment profits, sale, and rentals of these lands are then transferred to the PSF.

In August of 2019, the PSF had a balance of $46.5 billion. Of these funds, $1.2 billion was distributed to Texas public schools for the school year of 2018. The disbursement of these funds reduced the tax burden for low-income families that would normally be used for the education of their children.

The state of Texas also has a Permanent University Fund (PUF) which was established in 1876. The current value of the PUF as of September 2019 was $22.8 billion. The PUF distributes funding from its investment income of two-thirds to the University of Texas System, and one-third of its investment income to the Texas A&M Universities. The disbursement from the PUF to the state universities go towards buildings and the upkeep of the universities.

The Alaska Permanent Fund (APF), which is funded by severance taxes on the extraction of oil, follows a different approach to reducing the poverty rate for its state. The APF currently has a value of $67 billion. The APF on an annual basis distributes the Alaska Permanent Fund Dividend which is proposed by the governor of the state and then authorized by the Alaskan Legislature. For the year ending in 2019, each Alaskan citizen regardless of age received $1,606. With an average household population of 3.28, this represents additional income for each family of $5,267.68 for the tax year ending in 2019. With a per capita income of $30,651, the permanent dividend raises that income to $35,981 per year. With the poverty level for a family of three at $20,420 in Alaska, those families whose income is at or below $20,420 (80,012 families) an additional $5,267.68 raises a substantial portion of the working poor out of the poverty level. With the permanent fund dividend of $8,030 for a family of five, the fund raises this family’s income to $36,810. The addition of the dividend to a family’s income increases the chances for the children of these types of households to escape the poverty trap. This link shows how an average citizen in Alaska uses their PFD.

The New Mexico State Investment Council (SIC) manages the SWF for New Mexico. The New Mexico SWF is valued at $23 billion and is funded by a severance tax from oil and gas extraction. By constitutional amendment, seventy-five percent of distributions from this SWF goes to education. New Mexico uses this wealth to provide free tuition for all New Mexico state residents regardless of income at all New Mexico state and public universities. By providing access to a college education to all of its citizens, New Mexico is providing opportunities for those citizens who would not have been able to obtain a higher education, providing a ladder to higher-paying jobs, and a higher standard of living. In addition to free higher education, the SIC disburses up to $1 billion annually for state government operations.

The Alabama Trust Fund (ATF) like most sovereign wealth funds is based on severance taxes from the extraction of natural gas and oil. The current value of the ATF is $3.2 billion. The ATF disbursements are made to cities and counties throughout the state, providing assistance to their annual budgets, and reducing the need for higher taxes which leaves more money in the bank accounts of its citizens. Thirty-three percent of its distribution goes to cities and counties, Forever Wild Land Trust, Alabama Senior Services and the Alabama General Fund. The distribution to senior citizens helps to alleviate income issues with Alabama’s senior citizens. By providing a safety net to its senior citizens, and other citizens of Alabama, the ATF provides for a higher standard of living, and indirectly reduces the poverty rate in Alabama.

North Dakota’s sovereign wealth fund is known as the “Legacy Fund.” It currently has a value of $6.5 billion. The Legacy Fund is relatively new and was founded in 2010. It is funded as well by a severance tax on oil and natural gas. By a constitutional amendment to the state’s constitution, known as Measure One, no disbursement was allowed until 2017. From there the Legacy Fund distributes its investment earnings to the state’s general fund. As a result of the vibrant earnings of the Fund, the state legislature is considering abolishing state taxes and funding state government operations directly from the earnings of the Legacy Fund. By abolishing state taxes, more money will be left in the bank accounts of the citizens of North Dakota.

While disbursements from the sovereign wealth funds differ from state to state, the intent of these sovereign wealth funds are to establish a higher standard of living for each state’s citizens. From direct disbursement of funds, the Alaska Permanent Fund Dividend, to the funding of school systems in Texas and New Mexico, and the abolishment of state taxes in North Dakota, state sovereign wealth funds assist in the reduction of poverty. These funds also provide avenues of social mobility for their citizens through improved and higher education, as well as reducing the tax burden for lower-income families.

Monday, February 10, 2020

ICYMI: Gun Lake Investments / Waséyabek Development Company Partner to Acquire Real Estate Asset

TSW Community,

In case you missed it, two Tribal Sovereign Wealth investment companies announced their joint venture to buy the McKay Tower in downtown Grand Rapids. The 18-story, 154,000-square-foot building houses retail, office space, an event venue and luxury apartments on the upper floors. Tenants in the facility include Elliott’s News, Freshii, Kilwins, Sushi-Yama, Commerce Bank, Wells Fargo, Edward Jones, and TG Manufacturing. The building is 98.5 percent occupied.

Tribes partner in $17.5 million purchase of iconic McKay Tower in Grand Rapids

Gun Lake Investments (Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians) and WasĂ©yabek Development Company (Huron Band of the Potawatomi) partnered on the $17.5M acquisition.

Congratulations to Deidra Mitchell, Kurt Trevan and their teams.

In Perpetiuty,

TSW Panel @ RES 2020

TSW Community,

Are you headed to RES this year?

If so, consider checking out the session on Tribal Sovereign Wealth on Tuesday, March 3 @ 4pm.

Hope to see you there.

In Perpetuity,


Sovereign Wealth Funds: Exercising Tribal Sovereignty Through Wealth Management

Tuesday 4:00 p.m. - 4:50 p.m. - Versailles 4

  • Hilary Tompkins, Partner, Hogan Lovells U.S. LLP
  • Babak E. Nikravesh, Partner, Hogan Lovells US LLP
  • Jay Calhoun, Managing Partner, Apis Holdings
  • Shane Seibel, Executive Director, Southern Ute Indian Tribe - Growth Fund

This panel will provide a discussion of recent trends in sovereign wealth funds, lessons learned from sovereign wealth funds on the global stage, and unique opportunities and advantages for Indian tribes in this growing and evolving area. Panelists who have worked in the sovereign wealth fund arena will share their insights and experiences in creating, managing, and advising sovereign wealth funds, including individuals who have worked with tribes to implement new and innovative investment strategies.

Tuesday, August 6, 2019


TSW Community,

Did you know that a Tribal Sovereign Wealth Fund (TSWF) was a pre-IPO investor in the fastest growing enterprise software company of all time?

Twelve Clans, Inc, the sovereign wealth fund of the Ho-Chunk Nation, made an investment via special purpose vehicle into Slack Technologies back in 2017 and exited the deal for an undisclosed amount (they did pretty well) earlier this year in advance of its IPO. Slack is now publicly traded with a market cap >$15B.

While I certainly wouldn't recommend a one-off, venture-stage investment strategy for most TSWFs (anything at that stage should have an intentional portfolio strategy to offset the inherent risks), its a great win for the Ho-Chunk Nation and Indian Country.

In Perpetuity,

Sunday, July 22, 2018

Navajo Nation’s Master Trust Program & Permanent Trust Fund

TSW Community

In light of the recent offer of up to $525M in cash from the Navajo Nation to purchase Remington Outdoors, I'm reading more about the Navajo Nation's trust structure.

Current State:

According to the Navajo Times, the Navajo Nation's Master Trust Program ended 2017 with $3.28B in assets under management (AUM). The trust portfolio is currently made up of 41% in domestic equities, 33% ("about one third") in fixed income, 6% in real estate and about 20% in other strategies.

The largest fund is the Permanent Trust Fund. Other earmarked funds include Chapter Government Nation Building Fund, College Scholarship Fund, Vocational Education Scholarship, Handicap Trust Fund, Elderly Senior Citizen Trust Fund, Navajo Academy/Preparatory School, Land Acquisition Fund and Veterans Trust Funds.


The Master Trust is managed by the six members of the Nation's Investment Committee, made up of the following individuals (source):
  1. Controller of the Navajo Nation
  2. Appointee of the Navajo Nation President
  3. Chair of the Navajo Nation Budget & Finance Committee
  4. Appointee of the Navajo Nation Budget & Finance Committee
  5. Auditor General of the Navajo Nation 
  6. Attorney General of the Navajo Nation
The investment committee currently uses Portland, Oregon-based RVK for investment consulting services. RVK charges a flat consulting fee vs a fee based on assets under advisement (e.g., 10 BPS), and helps manage more than 20 fund managers across the asset classes.


According to a presentation from former Navajo Nation President Peterson Zah, the roots of the Trust started with $217M received from renegotiated royalties (coal, right-of-way, oil and gas) following the successful case against Kerr-McGee. That year, the Navajo Nation council passed resolution CJY-53-85 authorizing the creation of a permanent fund. 

The Permanent Trust Fund, which makes up the majority of the Master Trust Program, was established in 1985 with an investment of $26M. In establishing the Permanent Trust Fund, the objective was to diversify income streams away from the Nation's largely natural resources-based revenues AND protect future generations.

Governing Rules:
  1. Each year, the Nation would deposit 12% of annual revenue into the fund.
  2. For the first 20 years (1986-2007) the fund would have a spending policy of 0% (i.e., no distributions from the fund; 100% reinvestment of all returns). This would allow for the maximum benefit of compounding interest to growth the assets of the fund.
  3. After 20 years, 95% of the annual income generated by the fund (not the corpus of the fund) can be spent according to a 5-year plan approved by the Council.
  4. After 20 years, 5% of the annual income generated by the fund must be reinvested in the fund.
  5. All expenses incurred by the fund (administration, advisors, etc) would need to be paid by the fund.
Initial Spending Committee:

In 2002, a Permanent Fund Work Group (PFWG) was established to determine the details of the spending policy which was to begin in 2007. The work group recommended 50% of annual income would go to a Local Governance Trust Fund (LGTF) for certified chapters*, 45% of annual income would be reserved to plan for by the PFWG, and 5% would be reinvested according to the original guidance. 

The group then sought to test its recommendations through public hearings. Overwhelmingly, the public advised the work group and Council to reinvest the income (at least until AUM reached $1B) and to add financial controls to restrict the spending of the principal or corpus.

From these sessions came 5 recommendations:
  1. Develop a vision / strategic plan for the Navajo Nation
  2. Reinvest PF income for 5 years
  3. Repeal recommendation for 50% diversion to LGTF
  4. Resist further diversion and collateralization of PF
  5. Establish a mechanism for determining future expenditures of PF income
Protection of Assets:

Out of the recommendations came additional layers of financial control. Layer one requires a two-thirds vote by the Navajo Nation Council to authorize a referendum vote. The second layer requires approval by two-thirds of Navajo voters before the principal / corpus can be touched.

All-in-all, the Navajo Nation have been successful in the establishment and growth of their permanent fund. They took a deliberate step to establish the institution and save a portion of their wealth for the future, have been consistent with their strategy, and have been diligent on protecting the corpus through downturns in markets. They would be a good model to research if you're thinking of forming your own TSWF.

In Perpetuity,

* The Navajo Nation government is broken down into Agencies (regional governments) and Chapters (local governments).

Remington Rejects $0.5 Billion Cash Bid from Navajo Nation

TSW Community,

Did you see the news lately?

According to The New York Times, Cerberus rejected an offer valued up to $525M from the Navajo Nation to purchase Remington Outdoor (the gun manufacturer). Remington Outdoor is currently in Chapter 11 bankruptcy.

Navajo's plan for the business included both impact and return-oriented initiatives:

  • Impact Driven:
    • Eliminate AR-15 rifles
    • Eliminate consumer business except hunting rifles and shotguns
    • Invest in R&D around fingerprint "smart" gun technology
    • Shift assembly to the Navajo Nation to create jobs
  • Return Driven:
    • Focus sales efforts on law enforcement and military
    • Leverage minority ownership for contract preference
The Navajo bid was rejected after two months of consideration by the Remington Board of Directors.

The Navajo used the services of turnaround bankers Teneo Restructuring and was advised by attorney Drew Ryce, who was also involved in the attempt by Morongo to acquire gun-maker Colt out of Chapter 11 bankruptcy in 2015.

Both the Colt and Remington pursuits included a core thesis of helping the businesses qualify for government contracts under tribal / minority ownership. Generally, this is through the Small Business Administration's (SBA) 8(a) program. As a program of the SBA, any 8(a) advantages would be subject to size standards (i.e., the maximum size to be considered a "small" business) such as total revenue or number of employees. Assuming the use of NAICS code 332994 (small arms, ordnance and ordnance accessories manufacturing), the SBA states the size standard is 1,000 employees (link here for size standards). A quick google search shows Remington has more than 3,000 employees (source) and, as of Q3 2017, had $467M in revenue YTD.

As for the smart gun technology, NPR's Planet Money and Huffington Post both recently covered the challenges surrounding the technology.

The Navajo Nation made the offer in cash from its $3.3B investment trust. Had the transaction been completed, the single holding would have made up about 16% of the trust portfolio. According to a recent report from the Navajo Times, the trust portfolio is currently made up of 41% domestic equities, 33% in fixed income, 6% in real estate and about 20% in other strategies. RVK advises the trust committee as an investment consultant.

The Master Trust is managed by the six members of the Nation's Investment Committee, made up of the following individuals:
  1. Controller of the Navajo Nation
  2. Appointee of the Navajo Nation President
  3. Chair of the Navajo Nation Budget & Finance Committee
  4. Appointee of the Navajo Nation Budget & Finance Committee
  5. Auditor General of the Navajo Nation 
  6. Attorney General of the Navajo Nation
Interestingly, the President of the Navajo Nation has publicly expressed his concern on the offer:

This would be an interesting case study for future board members and managers of TSW Funds. 

What are your thoughts? How would you weigh the potential risks and rewards? How would you think about portfolio concentration and diversification? How would you balance impact and return-driven objectives? How would you balance the need for confidentiality and transparency? What diligence would need to be done to make you comfortable w/ the deal?

In Perpetuity,