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Alaska Permanent Fund increases budding alternatives allocation

The $39.2 billion fund, which manages income from the state’s oil and mineral resources, has also cut its domestic equity and fix-income exposure.

The $39.2 billion (€25.2 billion) Alaska Permanent Fund has upped its target allocation to alternative assets while cutting back its exposure to domestic equity and fixed-income investments.

Late last week, the fund’s board of directors approved an increase in the fund’s private equity and absolute return strategy, to six percent from four percent, according to a statement.

The board also authorized an increase in its infrastructure and emerging markets allocation, to three percent from two percent.

Although modest, the latest allocation increase reflects Alaska Permanent’s growing appetite for alternatives despite its relatively late entry into the asset class.  The fund, which famously makes direct disbursements to Alaskan residents from the state’s oil and mineral revenues, launched its private equity portfolio only four years ago.

Alaska Permanent’s $1.1 billion pre-increase private equity allocation is managed by Pathway Capital Management. As only $344 million of the allocation had been invested as of last year, the fund has not yet released return figures.

The move towards alternatives will be balanced by a reduction in the fund’s investments in US capitalization stocks and non-US developed market stocks, as well as US bonds. Domestic equity will drop from 27 percent to 26 percent, and domestic fixed income from 23 percent to 19 percent.

Some of Alaska Permanent’s early private equity commitments include $40 million to buyout fund Carlyle Partners V and $40 million to energy-focused First Reserve Fund XI.