Legacy Fund posts modest outperformance as Legislature raises spending rule to 8%

Scott Anderson, Chief Investment Officer of the Retirement and Investment Office, told the Legacy and Budget Stabilization Fund Advisory Board on May 20 that the Legacy Fund returned 6.5% over 10 years and held about $12.1 billion in assets as of Feb. 28, 2025.

He said the fund’s 10-year return “was about 6.5%” and noted that implementation added roughly 70 basis points of excess return versus the benchmark. Anderson also told the committee “the biennium earnings … was about $600,000,000” as of the June 30, 2024 mark used for legislative reporting, and that legislative changes raised the statutory spending rule.

The committee’s context: why this matters

The Legislature amended the spending rule for the Legacy Fund in bills identified in the meeting as House Bill 1176 and Senate Bill 2012; the change moves the allowed draw from 7% per biennium to 8% per biennium. Anderson said outside consultant RVK projected the 20-year market-value impact of that change at roughly $2.4 billion and an approximate $800 million effect over 10 years, with an estimated $1.34 billion in additional distributed earnings across 20 years. He summarized the technical point: “when we look at a 6.1% return on the Legacy Fund … the spending rule concept of using AUM is a much better approach than capital gains and income,” and cautioned that inflation affects real purchasing power.

Key facts and supporting details

- Assets under management: about $12.1 billion (02/28/2025). Anderson noted March numbers were not yet available. - Reported returns: 10-year = 6.5%; 5-year = 7.5%; 3-year = 5.3%; 1-year = 10% (figures presented through Feb. 28). Anderson said the expected capital markets return used in RVK’s analysis was about 6.1%. - Biennium earnings: the slide used a $601 million figure calculated under the prior 7% rule for the June 30 mark; Director of Finance clarified that after the change to 8% the comparable number was about $686 million. - Fees: about 43 basis points on the legacy portfolio as presented. - Sources of growth: committee members stressed new tax deposits remain the primary driver; a committee member observed that roughly 77% of the fund’s value is deposits from the state’s 30% allocation into the fund.

Discussion versus decision

This meeting reported performance figures and presented an analysis of the spending-rule change; the committee did not adopt new policy at the meeting. Committee members asked for clarification about biennium accounting dates and media coverage of short-term market drops; Anderson and other staff emphasized the distinction between realized and unrealized (paper) losses and said the fund rebounded after March volatility. No motion or formal policy change was made in committee regarding use of earnings or asset allocation.

Background and forward look

Anderson and staff highlighted that the fund’s real long-term outcome depends on nominal returns minus inflation and the ongoing deposit stream. He noted the legislative change in the spending rule is already in statute (bills cited during the meeting) and that the Office’s role is to explain economic drivers and implementation implications. The office will continue reporting updated monthly valuations and consultant scenarios to the Board.