Alaska Permanent Fund up 4.9% for FY 2015

Alaska’s sovereign wealth fund beat its benchmark for the 12-month period ending June 30 with alternatives contributing strongly to the outperformance.

Preliminary results show the Alaska Permanent Fund (APF) gaining 4.9 percent in fiscal year 2015 and significantly outperforming its benchmark of -1.4 percent, according to the Alaska Permanent Fund Corporation (APFC), the fund’s manager.

“This was a more volatile year for the capital markets, so we are pleased to be able to report a positive return overall,” acting executive director Valerie Mertz said in a statement. “After two years of rising stock markets, we weren’t surprised to see corrections in the US and overseas markets at the start of the fiscal year. Later rallies helped make up lost ground, but the earlier losses certainly weighed on overall returns.”

With the exception of the non-US stock and bond portfolios, which lost 5.2 and 2.4 percent respectively, all of the APF’s other portfolios posted positive returns.

Infrastructure finished the 12-month period ending June 30 up 4.7 percent with a market value of $1.5 billion, accounting for 2.4 percent of APF’s overall portfolio. Private equity was the strongest contributor with gains of 16.5 percent, followed by real estate with a return of 9.8 percent.

APF began investing in infrastructure in 2007. Last May, it expanded the portfolio to include assets such as timberland, farmland and leasable hard assets so as not to be limited by a rigid focus on traditional infrastructure sectors, particularly at a time when increased competition is driving up valuations.

“These favourable results are consistent with three and 10-year returns, and were achieved with generally less risk than the benchmark,” APFC said.

Infrastructure specifically has returned 9.7 and 7.4 percent in the last three and 10 years, respectively.

As of June 30, APF’s portfolio was valued at $52.8 billion after accounting for the Permanent Fund Dividend transfer of $1.4 billion. The 2014 dividend transfer was $1.2 billion.

The Alaska Permanent Fund was established by a constitutional amendment to protect revenue generated by the state’s oil industry in 1976. APFC was established four years later to manage the fund’s investments. Today, it also manages the assets of other funds designated by law, such as the Alaska Mental Health Trust Fund.