New Mexico Land Grant Fund Investments, Amendment 5 (2014)
The New Mexico Land Grant Fund Investments, Amendment 5 is on the November 4, 2014 ballot in New Mexico as a legislatively-referred constitutional amendment. The measure, upon voter approval, would affect the Land Grant Permanent Fund. Specifically, the amendment would do three things:
- Allow more than 15 percent of the fund to be invested in international securities.
- Provide for the investment and management of the fund in accordance with the Uniform Prudent Investor Act.
- Raise the reserve required to be maintained in the fund from $5.8 billion to $10 billion.
Text of measure
- See also: Article XII, New Mexico Constitution
The New Mexico Legislative Council Service provided arguments for and against the constitutional amendment. The following are the council's arguments in support:
|“||1. Balances short-term risk and long-term gain.
The amendment would update investment standards to match best practices, placing an emphasis on diversifying investment of the Land Grant Permanent Fund. Diversification balances risks so that short-term swings in the market have less impact on an investment fund as a whole. Moreover, the newer standards would allow the State Investment Council to make some longer- term investments that are projected to give a high rate of return even if they are expected to have short-term fluctuations. This type of investment would help counterbalance inflation pressures on the Land Grant Permanent Fund.
2. Provides necessary portfolio diversification.
Removing the limitation on foreign investment provides a tool to the State Investment Council that has been promoted as necessary to diversify investment portfolios and to earn higher returns on the investments.
3. Foreign investment component reflects modern business market.
Since several large corporations operate and profit on a global basis, such as some soft drink manufacturers, fast food chains, computer hardware producers and financial service providers, arguably there is already a "foreign investment" component to many stocks listed on such domestic exchanges as the Dow Jones Industrial Average and the NASDAQ Stock Market.
4. Contains an additional safety measure.
Raising the minimum reserve requirement for additional disbursements from the Land Grant Permanent Fund to $10 billion through fiscal year 2016 establishes a safety measure to insulate the fund in the short term while the State Investment Council explores greater diversity for investments from the fund. 
—New Mexico Legislative Council Service
The New Mexico Legislative Council Service provided arguments for and against the constitutional amendment. The following are the council's arguments against:
|“||1. Encourages risky investments.
Eliminating the 15 percent cap on foreign investments and adding the UPIA standard effectively encourages the State Investment Council to maximize returns at the risk of additional investment volatility. Such actions could jeopardize the value of the trust funds.
2. Foreign markets less stable than U.S. market.
Many U.S. investors are cautious about making significant investments in foreign markets due to concerns about volatile political situations, insecure financial structures or a lack of business diversification in many countries. Currently and historically, the U.S. financial market, despite the inevitable recessions and market corrections, is the most stable market in the world.
3. Might erode fund value.
As averaged over the past 25 years, the Land Grant Permanent Fund has earned an annual return on investment of 8.65 percent under current law — a more than respectable long-term rate of return. Changing the investment standards, and in particular removing the cap on foreign investments, could inject more volatility and risk and erode the value of the Land Grant Permanent Fund. 
—New Mexico Legislative Council Service
Path to the ballot
- See also: Amending the New Mexico Constitution
According to Article XIX of the New Mexico Constitution, a simple majority was required in the legislature to refer the amendment to the ballot. HJR 16 was approved in the New Mexico House and New Mexico Senate on February 20, 2014.
February 20, 2014 House vote
|New Mexico HJR 16 House Vote|
February 20, 2014 Senate vote
|New Mexico HJR 16 Senate Vote|
- New Mexico Legislative Council Service, "Summary of and Arguments For and Against the Constitutional Amendments Proposed by the Legislature in 2013 and 2014," accessed September 11, 2014
- New Mexico Legislature, "Status of HJR 16: Land Grant Fund Care & Investments, CA," accessed April 3, 2014
- Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
- New Mexico Legislature, "HJR 16 Final House Passage," accessed April 3, 2014
- New Mexico Legislature, "HJR 16 Final Senate Passage," accessed April 3, 2014
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