Alaska Permanent Fund has received offers to spin out its $19 billion alternatives business, documents from the sovereign wealth fund’s latest board of trustees meeting show.
The $68.24 billion investor has received “unsolicited proposals to partially outsource and invest” its alternative asset investment unit from potential strategic partners, the fund noted in documents for its 19-20 February quarterly meeting.
The interest in its alternatives business has come from active managers of public equities seeking to grow into private markets and alternatives, sister publication Private Equity International understands.
Such options have not been pursued nor explored, according to the documents.
Alaska’s alternatives business – led by Stephen Moseley – spans both funds and direct private equity investments, special opportunities, private credit and infrastructure. The business had $18.8 billion in net asset value as of 31 December.
Private equity accounts for the bulk of this at $9.5 billion, according to the meeting documents. Infrastructure, which has a target allocation of 5 percent, represents a much smaller portion at $2.5 billion or 3.6 percent of the overall portfolio.
Private Equity International understands Alaska is not considering outsourcing its private markets activity completely to a third party.
Instead, a joint venture on its alternatives business could be beneficial for the SWF by allowing it to maintain management and process continuity via a new entity, while being cheaper than outsourcing investments, the documents note. Alaska would still be able to retain customised and appropriate governance over the new entity.
The SWF would need to carefully consider which strategies to include, team composition and transitions, an execution timetable and cost implications, among others, according to the documents.
APFC is evaluating a new benchmark for the the fund’s private infrastructure portfolio and is considering switching to Cambridge Associates Infrastructure Index from the FTSE Developed Core Infrastructure Index for its listed infrastructure portfolio. It is also evaluating pacing and target allocations for its private markets commitments overall, which it plans to finalise in May as part of its revised investment policy.
Alaska’s alternatives team has also been battling to retain investment staff, referred to as a “critical risk” in the documents. At least two staff have received offers at between 2.5 and 3.5 times current compensation.
The SWF has made employment offers to qualified candidates which have been rejected, it notes.
Alaska notes its chief investment officer Marcus Frampton is paid around $357,000 – a figure far lower than the CIOs of CalSTRS and CPPIB who receive around $1 million and $3.5 million respectively.