Board of Investments defends passive indexing, explains ARPA loan rounds and private‑investment allocations

Director Villa, the director of the Montana Board of Investments, told the Senate State Administration Committee on Jan. 14 that the board manages investment pools for the state — including the Consolidated Asset Pension (CAP) pool — and oversees roughly $28 billion in assets across state funds, pensions and trusts.

Villa described the board’s multi-asset strategy and governance: CAP is diversified across domestic and international equities, fixed income (core and non‑core), private investments (via limited partnership structures), real estate, real assets (timber, commodities and energy-related holdings) and a cash allocation for liquidity. He said the board is heavily domestic in its public equity allocation (about 89% U.S. exposure in public markets) and that private investments are an important, higher‑performing long‑term asset class for pension returns.

Villa told senators the CAP pool earned an 8.94% market return in fiscal year 2024. He said the board has reduced operating costs and evaluates external managers and practices through annual audits and periodic fiduciary reviews; he told the committee the board ranks in the top quartile for both cost and performance when compared with peers.

On manager selection, Villa described a mix of passive and active approaches. For the domestic equity index allocation, he said the board purchases a passive index product from BlackRock and pays one basis point (0.01%) for that passive exposure, chosen because it was the lowest‑cost option available in a market review. Villa told senators, “politics makes terrible decisions with other people's money,” arguing that the board must focus on pecuniary (financial) impacts when selecting investments in line with statute.

Villa also described an ARPA-funded down-payment assistance loan program the board ran in multiple “rounds.” He said the initial allocation for that program was about $27 million and that the board deployed funds in several rounds to provide secondary loans alongside bank financing (first‑position bank loans, board in second position). He said the program closed Dec. 31 and that the loans are scheduled to be repaid to the state over the next roughly 20 years plus interest. Villa said the program furnished credit support to businesses that otherwise struggled to access capital during the recent period of high inflation.

On allocation sizes, Villa said roughly 17% of the CAP pool sits in the private-investments bucket (private equity / GPLP relationships) but noted that broader illiquid allocations (including real estate and real assets) bring total illiquid exposure north of that fraction. He cautioned that large illiquid positions must be managed to ensure monthly benefit payments are met.

Senators asked for clarifications about how the loan rounds were labeled and how quickly rounds were executed; Villa said rounds varied in length and that some later rounds were compressed because funds were available and decisions were made quickly. He also confirmed that banks participating in the down-payment program used the funds for capital purchases such as buildings or equipment and that the loans were collateralized by the purchased assets.

Villa's presentation did not produce a committee vote but prompted questions on program structure and oversight; committee members asked staff to schedule upcoming bill hearings and presentations.