Alaska cancels $650m in private equity, infrastructure commitments

The $28bn national oil fund has canceled commitments to funds including Alinda and Pathway Capital as it tries to re-focus on ‘core’ asset classes amid continuing losses.

The Alaska Permanent Fund, the US state’s $28 billion national oil fund, has pulled back hundreds of millions of dollars in planned commitments to infrastructure and private equity funds that were approved in July.

At its latest meeting, the fund’s board of trustees decided to cancel a planned $250 million commitment to Alinda Capital Partners’ second infrastructure fund, Alinda II, which is targeting $3 billion, according to the Probitas Partners 2008 Private Equity Deskbook.

The board also rescinded a planned $400 million commitment to private equity funds through the creation of a single investment vehicle to be set up by investment firm Pathway Capital Management. The buyout fund of funds, to which only Alaska could contribute, would specifically only target private equity funds investing in companies valued at $1 billion or less.

The board cancelled the commitments because of a decline in the value of the fund and “the need to balance toward core asset classes”. The fund’s assets were valued at $28.8 billion on 31 December, down $4.2 billion from its value on 30 September. The fund stood at $40 billion in October 2007.

Alaska has a target of 6 percent to private equity, with an actual allocation of 2.8 percent, 3 percent to infrastructure and 10 percent to real estate. In total, the fund invests about $3.2 billion in alternatives, and $3.7 billion in real estate.

The fund began investing in private equity about five years ago, and upped its allocation to alternatives to 6 percent last year. Alaska started investing in infrastructure in 2007. The fund remains interested in investing in private equity and is not pulling back from the asset class, a spokeswoman for the fund said.

At the meeting, the board also established a policy that will require divestment of directly-held companies doing business in Sudan. 

Alaska’s move comes as other public pensions are reviewing their asset allocations and in some cases pulling back on planned commitments. The $45.4 billion Pennsylvania Public School Employees’ Retirement System has withdrawn hundreds of millions of dollars in planned private equity commitments as it struggles with an over-weighted alternatives allocation.

PSERS cancelled commitments to funds including Cerberus Institutional Partners International, targeting $1.5 billion to $2 billion; Gold Hill Capital, a private debt fund targeting $225 million; Apollo European Principal Finance Fund, a private debt fund targeting €1.5 billion to €2 billion; HgCapital 6, a £1.75 billion buyout fund and Cardinal Ventures Partners II, a $160 million fund.