Ten years after Alaska achieved statehood, oil was discovered on the North Slope and the young state was suddenly rich. To save some of this non-renewable resource for future generations, Alaskans voted to create a Permanent Fund. The first deposit was $734,000. After 40 years of wise management, APFC has grown the Permanent Fund to more than $81 billion. Want to know how we did it?
Ten years after Alaska achieved statehood, oil was discovered on the coast of Alaska on state land. It was a huge find and when the state held the 1969 North Slope oil and gas lease sale a year later, it brought in $900 million in revenue. While there was a significant amount
of debate at the time as to whether some or all of the money from the lease sale should be saved, ultimately the proceeds were used to support infrastructure and social programs throughout the young state.
In 1974, as construction of the trans Alaska pipeline neared completion, Alaskans were looking towards the future and deliberating on how to best utilize the anticipated mineral royalties. Many of the state’s decision makers supported putting a portion of the expected revenues into a "permanent fund," where they would be out of reach of day-to-day government spending and could generate income into perpetuity.
Alaska’s Constitution does not allow for dedicated funds, so to direct these oil revenues into a permanent fund, the Constitution had to be amended. Placing the founding language for the fund in the Constitution had the added benefit of helping protect it from being spent by the Legislature without a vote of the people. A Constitutional Amendment requires a majority vote of the people of Alaska and one establishing the Permanent was approved 75,588 to 38,518 in 1976.
Alaska Constitution Article IX, Section 15
Section 15. Alaska Permanent Fund.
At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.
On February 28, 1977, the Permanent Fund received its first deposit of dedicated oil revenues totaling $734,000. Investments consisted almost entirely of bonds, while the Legislature had a four-year public discussion regarding whether the Permanent Fund should be managed as an investment fund or as an economic development bank. Governor Jay Hammond signed a bill in 1980 creating the Alaska Permanent Fund Corporation (APFC) for the purpose of managing investments. That year Legislature also approved the first Permanent Fund Dividend program, and the first dividend check of $1,000 was distributed two years later.
1974 | Construction of the 800-mile trans-Alaska pipeline begins and lasts 39 months. Costs total $8 billion, including the Marine Terminal in Valdez.
1976 | Alaska voters, by a margin of 75,588 to 38,518, approve a Constitutional Amendment establishing the Permanent Fund.
1977 | On February 28, the Permanent Fund receives its first deposit of dedicated oil revenues totaling $734,000. The Legislature begins four years of public discussions regarding whether the Permanent Fund should be managed as an investment fund or as an economic development bank.
1980 | The Alaska Legislature passes Senate Bill 161 creating the Alaska Permanent Fund Corporation (APFC) to manage the investments of the Permanent Fund, and places a list of allowed investments into state law. APFC is officially established as a state entity and the Board of Trustees is entrusted with oversight of the Corporation and the fiduciary responsibilities of Fund management. In the photo to the right, Governor Jay Hammond is shown signing the bill creating APFC.
$900 million in surplus oil revenues is deposited in the Permanent Fund by special appropriation. The Legislature
also approves the first Permanent Fund Dividend program. This program is ruled unconstitutional by the United States Supreme Court because individual dividend payments varied based on length of residency.
1982 | The Alaska Legislature, at the request of the Board of Trustees, enacts inflation proofing to protect the Fund’s purchasing power. The first Permanent Fund Dividend check of $1,000 is distributed. The Legislature pays this first dividend, not with Fund income, but with surplus oil revenues.
1983 | Following changes to the statutory investment list, the Fund makes its first investment in the stock market, and later that year, in directly held real estate. APFC is functioning as a strong, viable, and independent organization. For the first time, the Trustees are establishing long-term goals for rates of return and are formally developing an asset allocation policy designed to achieve their goals. Investments are being made in U.S. stock and real estate for the first time as the Corporation grows to ten employees.
1987 | Despite the stock market crash
in October 1987, the Fund’s performance ranks in the top 9% of all public funds in the U.S. Total annual throughput of oil in the trans-Alaska pipeline peaks at 2 million barrels per day.
1988 | APFC kicks off its Alaska College Internship Program as a way for the Fund to help young Alaskans gain entry into the field of finance and investing.
1989 | APFC increases to 18 employees. The Alaska Legislature grants the Trustees authority to invest in non-U.S. securities. The 7 billionth barrel of oil passes through the trans-Alaska pipeline.
1990 | The Fund begins to invest in stock and bond markets outside the United States.
1991 | On January 1, the 8 billionth barrel of oil arrives in Valdez. From 1991 through 2000, the Permanent Fund earned at least $1 billion in net income each year.
1993 | Fund assets reach $15 billion.
1994-1995 | APFC begins managing another fund: the Alaska Mental Health Trust Fund. By 1995, the Corporation has a sizeable staff of about 30. As the Corporation continues to mature, greater emphasis is placed on insulating the management of the Fund from political influence, while maintaining APFC’s ability to remain responsive to changes in state policy and accountable to Alaskans.
1997 | Surging stock markets drive Fund performance to all-time levels as the Fund grows to more than $22 billion. In a special forum, Alaskans around the state discuss the Fund's future. The Legislature appropriates another $803 million to the Fund's principal.
1998 | For the first time ever, Fund earnings exceed state oil revenues as the Fund reaches the $25 billion mark.
1999 | The Legislature increases the Fund’s investment flexibility to allow up to 5% of the Fund’s value to be invested in alternative investments.
2000 | The Trustees remain committed to a long-term, diverse investment strategy as the stock market begins a sharp decline that will last for three years. Trustees further diversify the Fund’s investment portfolio and increase the equity allocation to 53%.
2001 | 25th Anniversary The Board of Trustees formally endorses a constitutional amendment to change Fund payouts to a percent of the Fund’s total value (POMV). The first of a series of resolutions that would place this proposed change on a general election ballot are introduced in the Legislature at the Board’s request.
2002 | The Bear market that began in 2000 leads to the Fund’s first negative return in 2002. These market conditions carry through 2003.
2004 | APFC invests in two new asset classes: absolute return strategy funds and private equity. The Legislature changes state law to require cause before any of the four public members of the Board may be removed, furthering the efforts to keep APFC independent.
2005 | The Legislature makes a significant change in how Fund investments are determined by removing the allowed investment list from state law so that Trustees make investment decisions solely under the guidelines of the prudent investor rule.
2006 | The Fund reaches $35 billion in value, an increase of $5 billion from the prior year.
2007 | The Trustees add a new asset class, infrastructure, to the Fund’s investments. Several years of strong returns carry the Fund’s value to $40 billion.
2008 | A correction that began in late 2007 causes markets to drop dramatically and makes 2008 one of the five worst years in the 218-year history of the U.S. stock market.
2009 | The Board reorganizes the Fund’s investments into risk-based groups, where investments are grouped by the market condition that those assets are intended to address. This better fits the Board’s goal of building a portfolio that will provide a more stable return under a variety of conditions. Based on this and other innovative risk management activities, APFC receives an international award for innovation.
2012-2013 | Continuing the evolution of the Fund’s investments, the Board works to take advantage of APFC’s growing capabilities. Programs are created to bring international bond and infrastructure co-investments in house.
2014 | Fund assets reach $50 billion.
2015 | The Board amends two sections of APFC’s Investment Policy. One amendment allows staff to seek out any investment that has similar risk and return characteristics as infrastructure, rather than be limited to a rigid focus on traditional infrastructure sectors. The second amendment groups the Fund’s absolute return and real return investments under a single program. Specific amendments to the policy authorize the Fund to be placed in a smaller number of more concentrated investments to help lower investment costs and prevent overdiversification.
2016 | The Fund celebrates its 40th anniversary. FY16 is another volatile year, with continued global market corrections and declines in oil prices. However, APFC and the Fund are able to weather the storms with a diversified asset allocation, allowing significant losses in stocks to be offset set by gains in other asset classes. Oil prices eventually enter a period of relative stability, and the bond market outperforms expectations. The Fund ends FY16 with a value of just under $53 billion.
2017 | The Fund reaches a value of over $60 billion, growth that is attributed to APFC staff generating higher returns through active asset allocation and portfolio management. APFC is named a finalist for “Sovereign Wealth Fund of the Year” in Institutional Investor’s 15th Annual Hedge Fund Industry Awards. This serves as recognition of APFC staff’s stewardship of the Fund and commitment to being world-class investors on a global stage. APFC’s Trustees, Executive Leadership, and Staff implement a 5-year strategic plan, that is forward thinking, adaptable, consistent with APFC’s values, and reflective of stakeholders.
2018-2019 | For the first time in state history, the Legislature adopts a mechanism whereby Fund earnings are used not just to pay dividends, but to also contribute to state government under a percent of market value (POMV) methodology. Under this rules-based framework, the state operating budget for FY19 includes a $2.7 billion POMV draw from the Fund for the payment of dividends and to support government services. The POMV draw is based on a percentage of the average market value of the Fund for the first five of the preceding six fiscal years. The draw is subject to appropriation and is set in statute at 5.25% for Fiscal Years 2019-2021 and 5.0% from Fiscal Year 2022 onward.
In recognition of this transition period, when state revenues from oil development were unlikely to fully fund state revenue needs in the future, as a pivotal time for the Fund and Alaska, the Board of Trustees pass Resolution No. 18-04. This resolution affirms the importance of formulaic management of transfers into and out of the Fund to ensure its sustainability and long-term growth. In addition to the POMV structure, other elements are essential in achieving a balance between current demands on the Fund and the protection of intergenerational value: Adherence, Sustainability, Inflation Proofing, and Real Growth.
The Alaska Permanent Fund continues to grow in global stature and emerges as an integral part of our state’s fiscal future. In FY18, the Fund’s investments gain 10.74% and the Fund ends the year with assets under management totaling $64,894,345,000. The quality and diversity of the portfolio’s investment returns across all asset classes, and the Fund benefits from having a board-authorized investment structure that allowed APFC to identify and respond to targeted opportunities and risks within a shifting global financial landscape.
In FY19, APFC accomplishes significant growth with the support of Alaskans, welcoming 17 new staff and building up internal investment and management capabilities. The investment in staff, systems, and the remodeling of office space to accommodate today’s workflow requirements ensures Alaska has a platform to deliver for the next 40 years the results Alaskans have come to expect.
2020 | The Fund becomes Alaska’s #1 source of unrestricted general fund revenues for the State's budget given the decline in oil prices. The POMV draw from the ERA represents 42% of total General Fund revenues in the FY19 budget, 47% in the FY20 budget, and more than 50% in the FY21 budget.
APFC Board of Trustees release the Trustees’ Paper Volume 9: The Role of Sovereign Wealth Funds in Saving, Stabilization, and Generating Income, sharing best practices of peer funds from Norway to Saudi Arabia, and closer to home from New Mexico to North Dakota. The paper examines frameworks that have resulted in peers flourishing and floundering, and thoughtfully analyzes how Alaska might learn from those experiences.
2021 | The Fund reaches at an all-time-high of $81.9 billion with a record return of 29.73% for the fiscal year. With a 5% POMV draw, the Permanent Fund continues to be Alaska’s primary source of unrestricted general fund revenues, providing $3.1 billion to fund essential State services.
APFC celebrates the 45th anniversary of the establishment of the Alaska Permanent Fund.
1980 Trustee Paper 1 – Public Investment in Alaska, Essays from the Early 1980s
1989 Trustee Paper 3 – The Role of the Permanent Fund in Alaska's Fiscal and Economic Future
1997 Trustee Paper 5 – The Early History of the Alaska Permanent Fund
1999 Trustee Paper 6 – The Role of the Permanent Fund in Alaska's Future: The Principles and Interests Project
Renewable financial resource
In both the Alaska Permanent Fund's creation and stewardship, Alaskans have successfully converted non-renewable resources into a renewable revenue stream of intergenerational wealth. This has been accomplished by permanently saving a portion of Alaska’s natural resource royalty, protecting its long-term value, and investing it in a well-diversified portfolio of income-producing financial assets.
The Principal is the savings account that is protected from expenditure, and the ERA is the checking account that can be spent by the Legislature to support state services and programs. Both accounts serve different purposes, but are invested using the same asset allocation and are assigned a pro-rata share of the Fund’s value.
Historically, the Alaska Permanent Fund has been used as a savings device to generate revenues and pay dividends to eligible Alaskans. Today, the realized earnings from the Fund's investments are used to support the State’s General Fund through the POMV Draw from the Earnings Reserve Account for statewide services and programs, including the dividend.
Two Account Structure with POMV Draw Methodology
The Permanent Fund has two parts: the Principal and the Earnings Reserve Account. Both are invested together using the same asset allocation, but they are very different in how they can be used – one is permanent savings, the other is available to spend.
The Principal is the permanent part of the Alaska Permanent Fund. The Principal is to be used only for income-producing investments per the constitutional amendment establishing the Permanent Fund. The Principal grows through royalty contributions, special appropriations, and inflation proofing.
Royalty Deposits – AS 37.13.010 (a) (1) and (a) (2)
- The constitutionally minimum required 25% of royalty proceeds and the statutorily mandated deposits of 50% for leases after 1979.
Special Appropriations – AS 37.13.010 (a) (3)
- Legislative Deposits from both the General Fund and the ERA.
Inflation Proofing – AS 37.13.145 (c)
- The inflation proofing calculation is based on deposits into the Principal and the inflation rate calculated per statute. Since the Principal does not retain any of the realized gains on investments, it must receive an annual appropriation to offset the effects of inflation and preserve its purchasing power to benefit all generations.
Principal holds unrealized gains and losses on invested assets from the time they are purchased until they are sold.
Contributions to Principal through June 30, 2021
Once an investment is sold, it is recognized as a realized gain/loss, and that net realized income is then deposited into the Earnings Reserve Account.
The Earnings Reserve Account (ERA) is established in state law, AS 37.13.145(a), as a separate account to hold the net realized income from the Permanent Fund's investment portfolio. The ERA is available for the Legislature to spend through its power of appropriation. The ERA grows through the receipt of statutory net income. Statutory net income is the direct result of investment activity (decisions to buy and sell) and excludes unrealized gains and losses. There are two components to this income that flows to the ERA -
- Operating Income: Cash inflows from stock dividends, bond interest, and real estate rental fees available for deposit.
- Realized Capital Gains/Losses: All the net income (i.e., realized gains minus realized losses) generated by investment sales.
The ERA is invested together with the Principal under the same asset allocation and holds a portion of the unrealized gains/losses for its share of its investments.
Since inception through FY21, the investment of the Fund has generated more than $76.6 billion in net realized earnings deposited into the ERA, which have been used:
- to support the investment management and operations of the Fund;
- to partially fund state agencies involved with collecting royalties and distributing dividends;
- to pay dividends to eligible Alaskans;
- and to support government services and programs.
Per Alaska Statute 37.13.140(b), enacted in 2018, withdrawals from the ERA are based on a percentage of the average market value ("POMV") of the Fund, a method designed to create a withdrawal structure that ensures no more than a sustainable amount is drawn on an annual basis.
The Percent of Market Value (POMV) draw is based on a percentage of the average market value of the Fund for the first five of the preceding six fiscal years; this average creates a smoothing effect across years. The POMV draw provides a certainty of liability for managing the portfolio and a stable, predictable payout from year to year. The draw is subject to appropriation and is set in statute at 5.25% for Fiscal Years 2019-2021 and 5.0% from the Fiscal Year 2022 onward.
|FY 23 Draw|
|5 yr AVG||$ 67,051.9|
|5% Draw||$ 3,352.6|
The POMV draw in FY19 was $2.7 billion, in FY20 was $2.9 billion, $3.1 billion in FY21 and $3.1 billion in FY22. The POMV draw for the Fund is limited by the statutory allowable percentage and the amount available for appropriation in the ERA – the 'checking account' of the Fund.
APFC is a team of financial and legal professionals. It operates as a separate state entity under the oversight of an independent, professional Board of Trustees, who serve as fiduciaries of the Fund. The Board sets investment policy, reviews the portfolio’s performance, and works with management to determine APFC’s strategic direction.
Watch these videos to learn more about how we manage and invest the Alaska Permanent Fund.
APFC's Board of Trustees and Staff are unified in our commitment to promoting and adhering to the principles of transparency, accountability, and prudent investment practices in managing the Alaska Permanent Fund. Our APFC team is comprised of professionals in the fields of accounting, operations, information technology, administration, communications, risk, general counsel, and public and private investments.
To manage and invest the assets of the Permanent Fund and other funds designated by law in accordance with Alaska Statute Chapter 37.13.
Our vision is to deliver outstanding returns for the benefit of all current and future generations of Alaskans.
We act in an honorable, respectful, professional manner that continually earns and justifies the trust and confidence of each other and those we serve.
We are committed to wisely investing and protecting the assets, resources, and information with which we have been entrusted.
We are driven to excellence through self-improvement, innovative solutions and an open, creative culture. We are energized by the challenges and rewards of serving Alaskans.
The Alaska Permanent Fund Corporation
On April 8, 1980, Governor Jay Hammond signed SB 161, establishing the Alaska Permanent Fund Corporation as an independent state entity tasked with the Permanent Fund's management and investment.
APFC's team of professionals is responsible for the day-to-day operations, accounting, and investment of the Permanent Fund and is overseen by a six-member Board of Trustees, who serve as fiduciaries. Together, APFC's Trustees and staff strive to achieve long-term investment success for current and future Alaskans.
Our model is based on strong governance with expert board leadership, partnering with best-in-class asset managers, direct investing by world-class teams, and the ability to attract and retain top professional talent. This competitive advantage allows us to make strategic, efficient investment decisions.
As fiduciaries of the Fund, APFC's Trustees are committed to managing and investing the Fund consistent with the statutory findings in AS 37.13.020:
- The Fund should provide a means of conserving a portion of the state's revenue from mineral resources to benefit all generations of Alaskans
- The Fund's goal should be to maintain safety of Principal while maximizing total return
- The Fund should be used as a savings device managed to allow the maximum use of disposable income from the Fund for purposes designated by law
APFC is dedicated to the Fund's intergenerational success and has worked diligently and prudently to manage one of Alaska's primary sources of renewable revenue. Our diversified portfolio of public and private market investments is designed to provide a long-term, risk-adjusted return of 5% plus consumer price index ("CPI") to deliver on our mandate to provide a renewable resource that benefits all generations of Alaskans.
The finance team is an essential component of APFC, providing accountability and transparency to the work we do investing the Fund. Monthly, the Finance Team issues for public review:
Financial Statements - that show the assets, liabilities, and Fund balance of the Alaska Permanent Fund for the current month closing date and the previous fiscal year-end, as well as details regarding the income and expenses of the Fund.
History and Projections Report - a summary that provides a 10-year historical lookback and a 10-year projection of the Fund's deposits, income, and withdrawals.
Performance Report – that includes market values and performance return information for the Total Fund and each of the Asset Classes. The monthly performance reports include return information for periods up to 5 years and provide relevant benchmark comparisons to evaluate total Fund and asset class performance.
Our finance team works diligently with a third-party auditor to deliver comprehensive, audited information to our stakeholders about the Permanent Fund's holdings. The annual report includes the audited financial statements for the Fund as of June 30, 2020.
1988 Trustee Paper 2 – Wealth Management: A Comparison of the Alaska Permanent Fund and Other Oil-Generated Savings Accounts Around the World
1996 Trustee Paper 4 – Changes to the Investment World During the Permanent Fund's First Two Decades and a Look into the Future
2008 Trustee Paper 8 – Wealth Management Sovereign and Permanent Funds Around the World
In The Classroom
We hope that the resources provided here and throughout our website will be useful in helping you teach about the Alaska Permanent Fund and the Corporation that manages and invests these assets for all generations of Alaskans.
This section includes a presentation and three quizzes for secondary level students. We recommend that teachers instruct students to use the web site to research the answers. An Alaskan's Guide to the Permanent Fund is also a valuable resource.
Teachers may download the PowerPoint to present to their classes. This file contains a notes section to help teachers deliver the presentation.
AN Alaskan's Guide to the Fund
Alaska is more reliant than ever on the Permanent Fund. We are pleased to present the 2020 edition of "An Alaskan's Guide to the Permanent Fund."
This booklet offers the basics on the Alaska Permanent Fund, its history, how APFC manages and invests these assets, and its essential role in Alaska's future.