1. Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund. 2. In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. 3. In managing and investing an institutional fund, an institution: a. May incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution, and the skills available to the institution; and b. Shall make a reasonable effort to verify facts relevant to the management and investment of the fund. 4. An institution may pool two or more institutional funds for purposes of management and investment. 5. Except as otherwise provided by a gift instrument, the following rules apply: a. In managing and investing an institutional fund, the following factors, if relevant, must be considered: (1) General economic conditions; (2) The possible effect of inflation or deflation; (3) The expected tax consequences, if any, of investment decisions or strategies;
(4) The role that each investment or course of action plays within the overall investment portfolio of the fund; (5) The expected total return from income and the appreciation of investments; (6) Other resources of the institution; (7) The needs of the institution and the fund to make distributions and to preserve capital; and (8) An asset's special relationship or special value, if any, to the charitable purposes of the institution. b. Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the institutional fund's portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution. c. Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section. d. An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better-served without diversification. e. Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms, and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter. f. A person that has special skills or expertise, or is selected in reliance upon the person's representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.
59-21-03. Appropriation for expenditure or accumulation of endowment fund - Rules of construction. 1. Subject to the intent of a donor, as expressed in the gift instrument and subject to subsection 4, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors: a. The duration and preservation of the endowment fund; b. The purposes of the institution and the endowment fund; c. General economic conditions; d. The possible effect of inflation or deflation; e. The expected total return from income and the appreciation of investments; f. Other resources of the institution; and g. The investment policy of the institution. 2. To limit the authority to appropriate for expenditure or accumulate under subsection 1, a gift instrument specifically must state the limitation. 3. Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only income, interest, dividends, or rents, issues, or profits, or to preserve the principal intact, or words of similar import create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund and do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection 1. 4. The appropriation for expenditure in any year of an amount greater than seven percent of the fair market value of an endowment fund, calculated on the basis of market values determined at least quarterly and averaged over a period of not less than three
years immediately preceding the year in which the appropriation for expenditure is made, creates a rebuttable presumption of imprudence. For an endowment fund in existence for fewer than three years, the fair market value of the endowment fund must be calculated for the period the endowment fund has been in existence. This subsection does not: a. Apply to an appropriation for expenditure permitted under law other than this chapter or by the gift instrument; or b. Create a presumption of prudence for an appropriation for expenditure of an amount less than or equal to seven percent of the fair market value of the endowment fund.