Trustees’ Paper Volume 9

THE ROLE OF SOVEREIGN WEALTH
FUNDS IN SAVING, STABILIZATION, AND GENERATING INCOME

is now available!

The paper is in the Report Archive under the Resources Menu and is posted below.

2020_APFC_Trustees’ Paper Volume 9

Great to have the Alaska Permanent Fund and our CIO, Marcus Frampton, recognized amongst CIO Magazine’s Industry Innovators for 2019.

Our congratulations to all the nominees and awardees!

https://www.ai-cio.com/lists/2019-industry-innovation-awards/

https://www.ai-cio.com/lists/2019-industry-innovation-awards/?pid=46492

In this 8^th edition of the Power 100 list, the publication lauds “asset owners who have distinguished themselves in navigating a changing, and often perilous, market landscape.” This recognition factors in the contributions and qualities that CIOs bring forth for the ongoing success of the portfolios they oversee, the relationships they cultivate, and the teams that they develop.

The 2019 Power 100 | Chief Investment Officer

8th Annual List of the World’s Top CIOs

Congratulations Marcus on this deserved honor!

The Board of Trustees held its quarterly meeting in Fairbanks, Alaska on December 3-4, 2019. During the meeting, the Board examined the first-quarter investment performance of the Fund for the fiscal year 2020 (FY20) and discussed the paradigm shift of the Alaska Permanent Fund to an annual value-based methodology for consistent and stable withdrawals from the Earnings Reserve Account (ERA).

Chair Craig Richards notes that “the transition to the Permanent Fund contributing to state revenues through the Percent of Market Value (POMV) has created several new issues the Board of Trustees and state policymakers need to work through. Perhaps the most important is the risk that repeated bad years of market returns could result in the ERA not being able to fund state government and the dividend.  The Board of Trustees looks forward to developing a deep understanding of this risk, and developing recommendations to minimize it.”

Full news release: 201912_APFC BOT Quarterly Meeting News Release

The Alaska Permanent Fund Corporation (APFC) will hold its Quarterly Meeting of the Board of Trustees on December 3-4, 2019 in Fairbanks, AK. The public is invited to attend this meeting in-person or by teleconference; there will be an opportunity for public comment and participation.  Agenda items include: an update on APFC’s Real Estate portfolio, a discussion on APFC’s strategic plan, and an in-depth look at the Earnings Reserve Account. There will also be asset class updates, a performance report from Callan Associates, and a presentation from RCL Co. on Real Estate Strategies.

Agenda_APFC BOT Meeting_20191203-04_Revised

The Alaska Permanent Fund’s (Fund) investments gained 1.24% during the first quarter of the fiscal year 2020 (FY20), and the Fund ended September 30, 2019, with total assets under management valued at $64.1 billion (unaudited).

… In assessing the Fund’s FY20 Q1 performance, APFC’s Chief Investment Officer Marcus Frampton, CFA, CAIA, FRM notes that: ” … In the context of turbulent markets and a constantly changing landscape, I am pleased with this performance and believe that the portfolio is well-positioned to outperform going forward.”

… For planning purposes, APFC references both a current fiscal year and a 10-year forecast for the projected return of the Fund that is provided by our performance consultant, Callan Associates. It is understood that there will be a wide range of returns delivered by each asset class to the total Fund performance over any given time. Callan Associates projects a total return of 7% over the next 10-year period for the portfolio that APFC has constructed for the Fund.  …  It is accepted that actual results for individual years will be higher and lower, but it is expected that they will average to 7% over the forecasted period of 10 years.

… Performance overviews and updates for each asset class will be presented by Callan Associates and APFC’s Directors to APFC’s Board of Trustees during their quarterly meeting on December 3-4, 2019, in Fairbanks. The public is welcome to attend the meeting in person or via webinar, and the agenda will be posted on apfc.org one week in advance of the meeting.

Full News Release FY20 Q1

The Total Fund Value as of September 30, 2019, is $64.1billion (unaudited).

The value of the Principal totals $47.9 billion, it includes $41.6 billion in constitutionally protected deposits and $6.3 billion in unrealized gains.

The value of the ERA totals $16.2 billion, it includes $6.4 billion of accumulated realized earnings and $7.7 billion of committed realized earnings ($3.1B POMV in FY21, $4.0 B to the Principal in FY20, and Inflation Proofing for FY20), as well as $2.1 billion in unrealized gains.

APFC congratulates our CEO, Angela Rodell, on being recognized by the Sovereign Wealth Fund Institute (SWFI) as #4 among 100 of the most “significant, resilient, and impactful asset owner and public executives of 2019.”

This global recognition is based on SWFI’s analysis of dimensions that include: innovation, funding, returns and initiatives undertaken.  Among those recognized are the most influential leaders of some the of the world’s largest sovereign funds, endowments, foundations, pensions and central banks.

This is SWFI’s seventh annual ranking of public investors, the complete list can be found here: https://www.swfinstitute.org/news/75247/press-release-public-investor-100-rankings-released-for-2019

The Board of Trustees reviewed the fiscal year 2019 (FY19) investment performance of the Alaska Permanent Fund (Fund) with presentations from Callan Associates and the Alaska Permanent Fund Corporation’s (APFC) asset class directors, approved a FY2021 budget proposal, and accepted the Annual Audit as presented by KPMG. As noted in the 2019 Annual Report, released at the meeting, the Fund’s assets under management (AUM) reached an end of fiscal year high, totaling $65.4 billion as of June 30, 2019, comprised of $47.8 billion in the Principal of the Fund and $18.5 billion in the Earnings Reserve Account.

Callan Associates, APFC’s performance consultant, noted that APFC’s portfolio is well diversified across all major asset classes employed by institutional investors. In FY19 the Fund’s investments returned 6.32%, this strong performance puts the Total Fund in the second quartile relative to other large public funds, as well as other large endowments/foundations. As of June 30, 2019, the Fund’s long-term performance shows a cumulative return of 9.22% over the 10-year period and 6.35% over the 20-year period.

On September 20, 2019, APFC announced the launch of the Alaska Investment Program as directed by the Board Resolution 18-03 to establish an in-state private markets investment program utilizing external fund managers with an initial allocation of $200 million.  Chair Craig Richards notes that after a year in the making, he is “excited that the In-State Emerging Manger Program is now in place and looks forward the program’s two mangers, McKinley Capital Management, LLC and Barings, LLC., generating compelling returns for the Fund while raising capital in support of Alaska based private market investment opportunities.

The Board re-elected Trustee Richards as Chair and Trustee Brady as Vice-Chair.

The Alaska Permanent Fund Corporation is pleased to announce the launch of the Alaska Investment Program. Recognizing the opportunity to earn attractive returns by backing emerging private market fund managers and private market investment opportunities in Alaska, APFC’s Board of Trustees, through Resolution 18-03, directed APFC staff to select external private market fund managers to execute an Alaska focused private markets investment program with an initial allocation of $200 million.

Consistent with the requirements of Alaska Statute 37.13.120(c), this strategic approach to identifying and supporting talented private market fund managers and investments within Alaska will target a rate of return and a risk profile consistent with similar investments outside of Alaska.

Following a competitive process, two external fund managers were selected to implement this strategy: McKinley Capital Management, LLC and Barings, LLC.  At a presentation before Accelerate Alaska in Anchorage, CEO Angela Rodell noted “we are excited to get this program underway and look forward to working with these two managers to achieve competitive, market-based investment returns and capture investment potential right here in Alaska.”

McKinley Capital Management, LLC (“McKinley”) was founded in 1990 and today is the largest private financial services company in Alaska. McKinley currently manages approximately $5 billion worldwide for corporate and public pension funds, sovereign wealth funds, and other institutional investors.

A subsidiary of MassMutual, Barings, LLC is a global investment firm dedicated to meeting the evolving needs of clients and customers. Headquartered in Charlotte, North Carolina, Barings LLC and its subsidiaries have $325 billion under management* and maintain a strong global presence with business and investment professionals located across North America, Europe and Asia Pacific.   *as of June 30, 2019

Additional information on the In-State Investment program and contact information for McKinley Capital Management, LLC and Barings, LLC is available on our website under ‘What We Do / In-State Investments’.