Alaska Permanent Fund commits $350m to real assets

Announcing its allocations for Fiscal Year 2017, the sovereign wealth fund said it may approve an additional $200m to infrastructure "if warranted".

The Alaska Permanent Fund will have the option of investing up to $350 million in infrastructure and real assets in fiscal year 2017 following the approval of its board of trustees.

The total allocation will be shared between co-investments and infrastructure funds during the year beginning 1 July, based on “presented opportunities,” the Alaska Permanent Fund Corporation, the fund's manager, said in a statement.

“An additional $200 million may be added to the total infrastructure allocation if warranted,” APFC said.

The new allocation is slightly lower than the amount approved for the previous fiscal year.

A year ago, the APFC board approved $400 million, plus an additional $200 million if warranted, for FY 2016. According to a spokesperson, $500 million was invested in Global Infrastructure Partners' latest vehicle, GIP III, which is targeting $12.5 billion. According to a Securities and Exchange Commission filing earlier this month, the New York-based fund manager had raised $10.8 billion so far.

During its latest meeting, held in Anchorage on 24 and 25 May, the APFC board also approved other private market allocations, including up to $350 million to private credit; $900 million to private equity, with the option of adding another $200 million; up to $350 million to structured private equity, again with the option of an additional $200 million; and up to $800 million in opportunistic investments.

“The contributions from the fund's private market investments remain positive, and we believe they will become increasingly important in providing both growth and income in this low interest-rate environment,” APFC's board chairman Bill Moran said. “It makes sense to continue to build the private asset allocations.”

The fund returned 1.2 percent in the third quarter of fiscal 2016, which ended 31 March, below the benchmark return of 2.3 percent. The underperformance was due primarily to the fund's US stock portfolio. Other asset classes fared better than stocks during part or all of the fiscal year, according to a statement issued earlier this month.

Infrastructure and other real assets, which as of 30 April 2016 stood at $1.7 billion, returned 0.9 percent for the quarter and 10.2 percent for the fiscal year to date. The portfolio, which accounts for 3.2 percent of the $53.6 billion fund, has achieved three-year and five-year returns of 12.3 and 7.8 percent, respectively.

Last May, the APFC decided to expand the definition of infrastructure to include farmland, timber and leasable hard assets. “Historically, however, it has been all infrastructure with the exception of one timber investment,” APFC's spoksesperson Laura Achee said in an e-mailed response.

The fund's infrastructure investments, since it began allocating capital to the asset class in 2007, are with the following vehicles: Gateway Infrastructure (formerly Citi Infrastructure; 2007); GIP I and II (2007, 2011); EQT Infrastructure II (2012); Actis Energy III (2013); LS Power III (2013); Terminal Investments (direct co-investment 2013); North Haven Infrastructure Fund II (formerly Morgan Stanley Infrastructure Partners II, 2014); Twin Creeks Timber (2015); and most recently GIP III.

APFC has also invested $376 million in listed/public infrastructure. 

Established in 1980, APFC manages the investments of the Alaska Permanent Fund, a sovereign wealth fund created four years earlier to protect the revenue generated by the state's oil industry.

Today, APFC also manages the assets of other funds designated by law, such as the Alaska Mental Health Trust Fund.