The Alaska Permanent Fund (APF) is set to expand its infrastructure portfolio to include timberland, farmland and leasable hard assets such as aircraft and railcars following a recent decision by the board of trustees of the Alaska Permanent Fund Corporation (APFC), manager of the US sovereign wealth fund (SWF).
“Adding additional types to infrastructure would allow staff to consider a wide range of real asset categories with similar portfolio characteristics as those envisioned for infrastructure, which might be at a more attractive point in their supply/demand cycles than traditional private infrastructure is today,” APFC spokesperson Laura Achee said in an e-mailed response.
The move comes at a time when high valuations, caused by increased competition, are leading a growing number of investors to look outside the core infrastructure space.
APFC’s board which met earlier this month also approved allocations totalling $400 million to infrastructure, split between co-investments and infrastructure funds, with co-investments limited to $200 million.
“An additional $200 million may be added to the total infrastructure allocation if warranted,” APFC said in a statement, emphasising that all allocations are dependent upon staff or outside managers finding suitable investments. If not, then the funds earmarked may not be committed by the end of fiscal year 2016, which ends September 30, 2016.
Asked whether APFC would be focusing on any particular geographies or sub-sectors within infrastructure, including the new real assets added to the portfolio, Achee responded that “there are no specific allocations or directions within the $400 million to any particular asset type, other than that no more than $200 million may be placed in co-investments.”
APF has been investing in infrastructure since 2007. The portfolio returned 1.3 percent for the third quarter of fiscal year 2015, which ended March 31, and 4.9 percent for the fiscal year-to-date. The infrastructure portfolio is valued at $1.4 billion, representing about 2.7 percent of the fund’s total assets of $53.9 billion.
The Alaska Permanent Fund was established by a constitutional amendment in 1976 to protect revenue generated by the state’s oil industry.
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.