Alaska Permanent Fund Corporation

Country: United States

Established: 1976

US$ Billion: 35.5

Origin: Oil

Firm Investment Style: Index

Entity Structure: Corporate

Transparency Rating: 10

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 gas] sale or royalties.

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 Corporation 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 grew from an initial investment of $734,000 in 1977 to the current sum of approximately forty billion dollars as of July 13, 2007. 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:
Private Equity
Fixed Income
Real Estate (Funds or Direct Investments)
Absolute Return Strategies

The Governor of the State of Alaska appoints the board of six trustees sets APFC policy. Alaska 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.

News and Updates

Alaska permanent fund rebound softened by trustee board's decision
The article states, "For at least six months, the Alaska Permanent Fund has been holding more bonds and fewer stocks than its policies call for in the hopes that bonds would out perform stocks - a gamble that may have been costly for the $30 billion fund that finances annual dividend checks to state residents.

Parts of the battered portfolio, stocks especially, have recently jumped in value. That follows the permanent fund Board of Trustees' decision last fall, made on the advice of investment staff, to delay rebalancing the portfolio.

In December, some trustees said they were surprised to find out the permanent fund wasn't rebalancing regularly. Still, for months the staff continued to deposit new oil revenue into the over-allocated bond account. Friday, Alaska Permanent Fund Corporation Executive Director Mike Burns said it was to keep liquid assets available. "
read more: Juneau Empire

US Representative Young endorses energy projects
The article states, "Young suggested the Alaska Permanent Fund invest in power projects, instead of investments elsewhere.

'Instead of investing our money in real estate in Virginia, bring that money back here and invest it in power,' he said.

The real estate he was referring to is the Permanent Fund's huge Tyson's Corner Mall in Northern Virginia. The often confrontational Congressman sounded conciliatory in Juneau. His message: Everyone needs to work to bring more power to Alaska.

'Lets all work together, let's hold hands, let's achieve the goal of producing energy for everyone in Alaska,' he said."
read more: Juneau Empire

Permanent Fund sells interest in Ketchikan mall
Juneau Empire reports that, "The Alaska Permanent Fund Corp. has sold its interest in the Plaza Port West shopping mall in Ketchikan, its only real estate investment property in the state. The sale of the $6 million property was handled by the Carlton Smith Co. of Juneau. The permanent fund owns 13 percent of the property, which was managed by Kennedy Associates, a Seattle-based real estate firm, on behalf of the permanent fund and several other investors.

With the sale of Plaza Port West, the permanent fund's $3.7 billion real estate portfolio now has no holdings in Alaska, with the exception of the Goldbelt building where its own offices are located.

The corporation's executive director, Mike Burns, said it neither specifically seeks out or bars investments in Alaska by its handful of real estate management firms.

'We're neutral on it,' he said.

'Investments in-state have to meet the same criteria as out-of-state; there's no incentive or prohibition' on investing in Alaska, he said. "
read more: Juneau Empire

Half of state royalties now to go into Permanent Fund
The Anchorage Daily News reports that, "starting this month, 50 percent of the royalties generated from state mineral leases issued after Dec. 1, 1979, will be placed in the Permanent Fund. That's an increase from the 25 percent that has been transferred since 2003. The increase is due to the automatic repeal of a 2003 law that temporarily cut the rate at 25 percent, the state Department of Revenue said."
read more: Anchorage Daily News

Alaska fund puts $750 million in infrastructure funds
According to Pensions and Investments, "Alaska Permanent Fund Corp., Juneau, committed $500 million to Goldman Sachs Institutional Infrastructure Partners II and $250 million to Alinda Capital Partners Infrastructure Fund II.

The fund’s board also approved adding $400 million to private equity fund-of-funds manager Pathway Capital Management to invest in small and midmarket private equity funds that invest in companies with market capitalizations of $1 billion or less."
read more: Pensions and Investments

University of Alaska Anchorage newspaper urges Alaska Permanent Fund to stop Sudan investment
Alaska legislators need to act fast and pass a bill designed to stop the Alaska Permanent Fund from investing in companies operating in Sudan. House Bill 287 "mandates targeted divestment and prohibits future investment in the state managed PFD and Pension Funds in targeted companies that do business with Sudan," according to the House Majority Web site. "Alaska has very little invested in Sudan, about 36 million, or 0.1 percent of total assets," said the House Majority Web site.
read more: The Northern Light

$360 million of Alaska Permanent Fund may go towards keeping Alaskans warm
Despite a vast supply of oil, Alaskans face above normal prices on fuel that results in high heating costs. Now state lawmakers are considering offering hundreds of dollars in rebates to help Alaskans offset high home-heating prices. High heating costs result from the steep cost of shipping oil by barge or plane to the Alaskan hinterlands. Alaskan lawmakers have less than two months to address the issue before risking embarrassment by Venezuelan leader Hugo Chavez, who in the past has been quicker to come to the aid of Alaskans than their own Legislature. Just last year, Citgo the Venezuelan oil company donated $5 million to Alaska's poorest communities in order to keep them warm. Alaskan Rep. Bill Thomas, a Republican has suggested a $500 payout to state residents, which would cost nearly $360 million. Furthermore, Bill Thomas indicates that the payout could come from the Alaska Permanent Fund.
read more: The Associated Press


Alaska Fund Site

1. All figures quoted are from official sources, or, where the institutions concerned do not issue statistics of their holdings, from other publicly available sources.

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