Last updated on 2026-08-28
I generally speak highly of the South Dakota Investment Council and its longtime chief stock-picker Matt Clark. I’d be inclined to speak well again of SDIC”s management of state pensions and trust funds, given a billion-dollar FY 2026 uptick in the total portfolio value after a lackluster FY 2025. But the 10.60% return on just the South Dakota Retirement System fund that the SDIC reported to the Legislative Executive Board Wednesday doesn’t look that hot compared to the 17.72% capital markets benchmark return for the same period:
“Underperformance due to cautious asset allocation and private investments,” says SDIC at the top of that slide. But this is the seventh year in the last ten that SDIC’s cautious allocation has brought in less money than the market benchmark, the fourth straight year of falling behind benchmark, and the third straight year that the difference between the market benchmark and SDIC’s performance has been more than seven percentage points:
To sustain its aura of awesomeness before the legislators who set its budget, SDIC has to resort to emphasizing that, over its entire 53-year history, it still has a better betting average than investors at large:
I understand the desire to focus everyone’s attention on the first two lines of the first table, but the long tail of the first chart and the whole second table and chart catch my eye and make me feel like we’re talking to Grandpa about his driving: I know, Grandpa, you’ve been driving for 53 years and you’ve never had a wreck, but the last ten years, you’ve been drifting into the rumble strips an awful lot, so let’s talk.
Clark told legislators last Session that this underperformance is by design as he keeps South Dakota’s pension money out of artificial intelligence hype. I called Clark’s caution “sensible” last spring, but as I look at the charts above, I’m rethinking that judgment in light of my own investment bets. I share Clark’s expectation of an AI bubble-pop, but there’s still a lot of money to be made on semiconductors and other hardware, which everybody is going to keep using more of whether it’s for chatbots or just plain old computers and phones refrigerators.
Clark defended SDIC”s caution by the Executive Board, “We don’t believe we can predict the short-term timing.” But the trend of underperformance predates AI hype. We’ve underperformed for seven of the last ten years; how many more years does it take for the short term to become the long term? If this trend continues much longer, SDIC won’t even have good 30-year and 50-plus-year returns to brag about. SDIC and the Executive Board take a serious look at tempering our investment caution and recovering some of SDIC’s early-era mojo.
Yeah, I think he’s correct to be conservative with people’s retirement money. If people want riskier investments they can always fund their own IRA. I mean 10 percent return is pretty good especially if you are staying out of the bubbles that are likely to burst.
I’m impressed with how well the fund held up in 2022. Eventually that will happen again and the fund compared to the benchmark will look much better. When running a fund that has to payout every month, huge drawdowns are what need to be avoided as a top priority, not outperforming when things are going up.
We need a national senator or congressman advising our portfolio; that’s who know where the market will go (and take action to get it there).
9% interest rates and 10% is good, Don? Why is Matt not answering questions from one of his top managers? Why are there none at state level or higher picking up on her words? You’ve been one of the top whistle blowers in SD and now 1% over current interest rates is good enough for 100,000 state retirees at 50,000$ ~ 5Bil annual drawdown on a 20 Bil account? Ask Spearfish where average housing has increased 400% in the last 30 years. https://www.exposelies605.com/