Alaska Permanent Fund Corporation

APFC

United States – Alaska US$ 46.8 Billion
Established: 1976
Transparency Rating: 10
View Sovereign Fund Transaction Data
View Asset Allocation		 Origin: Oil
Firm Investment Style: Mixed
Entity Structure: Corporation
Pop Est.: 731,449 – 2012 Alaska
Wealth Per Capita Est.: $63,983
Summary
In 1976, Alaska voters, by a 2-to-1 margin, approved a constitutional amendment that authorized the Alaska Legislature to create the Alaska Permanent Fund. The Alaska Permanent Fund is a constitutionally established fund, managed by a semi-independent corporation, established by Alaska in 1976. Shortly after the oil from Alaska’s North Slope began flowing to market through the Trans-Alaska Pipeline System, the Permanent Fund was created by an amendment to the constitution of the U.S. state of Alaska to be an investment for at least 25% of proceeds from some minerals such as oil and gassale or royalties.

Background
The Fund does not include either property taxes on oil company property nor income tax from oil corporations, so the minimum 25% deposit is really more like 11% if those sources were also considered. The Alaska Permanent Fund sets aside a share certain oil revenues to continue benefiting current and all future generations of Alaskans. Many citizens also believed that the legislature too quickly and too inefficiently spent the $900 million bonus the state got in 1969 after leasing out the oil fields. This belief spurred a desire to put some oil revenues out of direct political control.

The Alaska Permanent Fund Corporation manages the assets of both the Permanent Fund and other state investments, but spending Fund income is up to the Legislature. The APFC is to manage for maximum prudent return, and not–as some Alaskans at first wanted–as a development bank for in-state projects. The Fund started from an initial investment of $734,000 in 1977. Some growth was due to good management, some to inflationary re-investment, and some via legislative decisions to deposit extra income during boom years. Each year, the fund’s realized earnings are split between inflation-proofing, operating expenses, and the annual Permanent Fund Dividend.

 Strategy & Objectives
One of the most important things that the Board does is to review, adopt and monitor an asset allocation that achieves a five percent real (above inflation) rate of return in accordance with the Prudent Expert Rule. The Prudent Expert Rule charges fiduciaries to act with discretion and intelligence, to seek reasonable income, preserve capital, and, in general, avoid speculative investments. To reduce risk exposure, APFC diversifies assets as well as management styles.

    Some of their asset allocation consists of

    Equities

    Private Equity

    Fixed Income

    Infrastructure

    Real Estate (Funds or Direct Investments)

    Absolute Return Strategies

Governance
The Governor of Alaska appoints the board of six trustees which set the investment policy of the Alaska Permanent Fund Corporation. Alaskan law provides that the APFC Board be comprised of four public members, the Commissioner of Revenue and one additional cabinet member of the governor’s choosing. Public members serve staggered four-year terms.

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