The Alaska Permanent Fund Corporation’s (APFC) Board of Trustees will hold their Annual Meeting on September 27-28, 2023 in Anchorage at the location identified in the agenda, linked below. Agenda items include: asset class overview (real estate presentations), report of the annual audit, FY25 proposed budget approval, election of corporate officers, strategic plan discussion/update, and more.

The public is invited to attend this meeting in person, via Webinar, or telephonically (please refer to the agenda). There will be an opportunity for public comment and participation at 8:30 a.m. when the meeting commences on September 27, 2023. If the public wishes to sign up for public comment, please indicate so when registering via WebEx. If you have any issues registering for public comment, please reach out to Jennifer Loesch (information in the agenda) at least one business day prior to the meeting.

September 27-28, 2023 APFC Board of Trustees Annual Meeting Agenda
September 27-28, 2023 APFC Board of Trustees Annual Meeting Packet

APFC welcomes Ryan Anderson, Alaska Department of Transportation and Public Facilities Commissioner, to the Board of Trustees.

In joining APFC’s Board, Trustee Anderson brings a depth of public service and commitment to serving fellow Alaskans across our State.

Governor Dunleavy appointed Commissioner Anderson to one of the two seats on the Board reserved for heads of principal departments of state government per AS 37.13.050.

The Board of Trustees held a Special Meeting on September 6-7, 2023 to discuss the FY25 budget proposal and upcoming working group initiatives, and an Audit Committee on September 7, 2023 to review the FY23 independent audit report and consider the internal audit functions. The Board also took action to authorize the FY24 budget authority to enter a lease for the Anchorage satellite office.

The directive to open an Anchorage office is part of the Corporation’s 2020-2025 strategic plan and has been publicly discussed in meetings over the past four years. Throughout, the Board has been on record asking for progress on the satellite office. As recruitment and retention have been challenging for many employers, including APFC, considerations have been made to advance and assess tools, including adopting a remote-work policy. Opening an additional office in Anchorage, the state’s largest city will broaden the playing field by providing another option for employees. The Alaska Permanent Fund Corporation’s headquarters will remain in Juneau, our home since 1980.

Given the state’s reliance on the earnings of the Fund to provide more than 50% of the undesignated general fund revenue stream, the Board considered the durability of the Earnings Reserve Account (ERA). Under the current two-account structure, the Principal contains savings that are used for income-producing investments and the Earnings Reserve Account holds the investment income that is available for the legislature to appropriate to support the state’s budget, including essential services and the dividend. The ERA is essentially the checking account of the Fund and it grows through statutory net income which is net realized gains generated through investment activity. Given current market conditions, the amount of income generated through investment activity has decreased compared to previous years. As a result, the spendable portion of the Permanent Fund is being used faster than it is being replenished.

This fall the Board of Trustees is taking on important initiatives to support the ongoing success of the Alaska Permanent Fund Corporation’s investment capabilities, enduring growth of the Permanent Fund as the state’s largest renewable financial resource, and its ability to provide to meet the needs of today’s generation as well as tomorrow’s.

The Special Meeting provided a discussion opportunity and a preliminary vetting of ideas associated with the Board’s long-term strategic planning efforts, the development of Trustee Paper #10, and an overview of the proposed FY25 budget.

• Strategic Planning – A group of volunteer board members will start working with staff and KMD Services & Consulting to establish long-term goals for the Corporation and the Fund. This work will continue throughout the fall, and the resulting plan will provide a strategy for meeting the established goals, as well as clearly communicating the direction to our stakeholders. It is expected that this item will be included on future Board meeting agendas.
• Trustees Paper #10 – A group of volunteer board members will work together with Dr. Malan Rietveld to research, write, and publish a policy paper on the Permanent Fund. As contemplated, the paper will include a history of the Fund, an overview of the Fund’s structure, insights into the durability issues under the current construct, and potential solutions to bring the Fund in line with modern endowment practices. As with former Trustee Papers, this study will anchor the history and policy direction for the Alaska Permanent Fund and the Corporation.
• FY25 Budget Proposal – This budget request acknowledges the importance of APFC’s continuing success as the largest sovereign wealth fund in the US and the 2nd largest per capita globally. Budget resources are essential in ensuring that the Corporation can fulfill our vision of delivering outstanding returns for the benefit of all current and future generations of Alaskans. Accomplishing this vision requires skilled and capable professional staff, discipline in adhering to long-term strategies, and durable resources.

Board Chair Ethan Schutt notes, “As a public corporation, we value the transparency that our open meetings bring to the process of investing on behalf of Alaskans. With that comes the reality that our listeners need to recognize and differentiate between the preliminary discussion of ideas vs. acting to moving forward with an initiative that only happens via board action, that is, a vote.”

The next meeting of the Board of Trustees will be held in Anchorage, Alaska, on September 27 and 28, 2023.

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The financial statements for the beginning of the fiscal year 2024 (FY24) for the Alaska Permanent Fund are now available. As of July 31, 2023, the Alaska Permanent Fund has an unaudited total value of $75.7 billion. The value of the permanent deposits in the Principal is $56.5 billion with $12.4 billion of associated unrealized gains. The Earnings Reserve Account (ERA) has $3.7 billion committed to the FY25 annual draw to support state revenues, $1.4 billion to inflation-proof the Principal, $0.5 billion of uncommitted realized earnings and $1.2 billion of unrealized gains associated with current investments.

While positive performance returns were achieved in FY23 despite a high inflationary environment and relatively flat markets, the amount of income generated through investment activity has decreased compared to previous years. As a result, the spendable portion of the Permanent Fund is being used faster than it is being replenished.

While this is reflected in the start of FY24 financial statements, it is important to note the current fiscal year’s (FY24) percent of market value transfer for the State of Alaska is already accounted for. Additionally, there is sufficient money in the earnings reserve account to make next year’s (FY25) annual distribution to the State and support the FY24 appropriated inflation-proofing payment to the Principal, which are reflected as commitments on the financials.

To better inform Alaskans on the sustainability of the Fund to provide for generations, APFC’s Board of Trustees will be working on Trustee Paper #10. As contemplated, the paper will include a history of the Fund, an overview of the Fund’s structure, insights into the durability issues under the current construct, and potential solutions to bring the Fund in line with modern endowment practices. As with former Trustee Papers, this study will anchor the history and policy direction for the Alaska Permanent Fund and the Corporation.

https://apfc.org/financial-and-performance-reports

The Alaska Permanent Fund Corporation’s vision is to deliver outstanding returns for the benefit of all current and future generations of Alaskans. Accomplishing this vision requires skilled and capable professional staff, consistent discipline in adhering to long-term strategies, and durable accountability to our stakeholders.  It also requires the fortitude to be adaptable, to grow, and to set forth meaningful action.

Expanding our in-state presence by opening a satellite office in Anchorage, in addition to the existing Juneau office, has been part of the Alaska Permanent Fund Corporation’s strategic plan for the past four years.  This strategy brings value to our stakeholders by providing an Alaska-based opportunity to enhance our recruitment and retention of talented, high-performing investment management professionals.

The Alaska Permanent Fund Corporation was created for the purpose of investing, safeguarding and accounting for the Permanent Fund for the long-term benefit of all Alaskans. As the largest sovereign wealth fund in US and 2nd largest per capita globally, APFC must meet or exceed the opportunities and resources available to our peers to achieve top investment returns. Recruitment and retention have been challenging for many employers, including APFC. Opening an additional office in Anchorage, the state’s largest city, will broaden the playing field by providing another option to retain existing employees and open another door to recruit new talent.

The directive to open an Anchorage office is part of the Corporation’s 2020-2025 strategic plan and has been publicly discussed in meetings over the past four years. Considerations have also been made to advance and assess additional tools, including adopting a remote work policy. Throughout, the Board has patiently insisted on progress on the satellite office initiative. APFC is now forward with a cost-effective solution to open a satellite office because of an opportunity to lease space in the state-owned Cordova Building located in downtown Anchorage.

It is recognized that expanding opportunities to recruit and retain world-class talent in Alaska is essential to the ongoing success of APFC’s ability to generate revenue for our State. APFC has staffing resources for full-time positions; currently, there are 12 vacancies. Numerous special board meetings have focused on improving the retention of qualified, high-performing staff and creating incentives to fill vacancies. To ensure the Corporation has all the tools necessary to support staffing needs, progress has been made on enhancing the organization’s culture, better defining and increasing pay scales, making remote work more accessible, and now the Anchorage office as part of those more extensive efforts.

The Alaska Permanent Fund is Alaska’s renewable financial resource, providing more than 50% of the revenue to support state services and programs.  It takes a team of dedicated corporate professionals to ensure that the expectations of our fellow Alaskans, partners, and stakeholders are met in meeting the performance objectives of investing billions of dollars of assets across a globally diverse and sophisticated portfolio.

At the forefront, the Trustees are entrusted with ensuring that the Alaska Permanent Fund is prudently managed and invested for the intergenerational benefit of all Alaskans. To do so, the Permanent Fund is invested for the long-term horizon – into perpetuity – permanently – to benefit generation after generation of Alaskans. We all must recognize that strategic growth, both for the Fund and the Corporation, is essential to the success of both.

While we recognize that this new satellite office has raised questions among Alaskans, we ask for your support in our initiative to provide additional Alaska-based staffing opportunities. In working with our statewide partners, we look forward to providing further flexibility for APFC’s leadership in recruiting and retaining world-class talent in Alaska.

The Board of Trustees

Alaska Permanent Fund Corporation

The Alaska Permanent Fund Corporation’s (APFC) Board of Trustees will hold a Special Meeting and an Audit Committee Meeting on the following dates:
September 6-7, 2023 – Special Meeting (times vary, see agenda)
September 7, 2023 – Audit Committee Meeting – 1-5 pm

The public is invited to attend these meetings in person, via Webinar (information listed in the agendas below), or telephonically.

Please see the agendas for more details.

September 6-7, 2023 APFC Board of Trustees Special Meeting Agenda
September 6-7 APFC Board of Trustees Special Meeting Packet *REVISED*

September 7, 2023 APFC Board of Trustees Audit Committee Agenda
September 7, 2023 APFC Board of Trustees Audit Committee Meeting Packet_revised

__PRESENT

Trustee Jason Brune has been appointed by Governor Dunleavy to the four-year public seat on the Alaska Permanent Fund Corporation’s Board of Trustees.  We welcome the continuation of  Trustee Brune’s support of APFC and the investment of Alaska’s largest renewable financial resource.

We also extend our sincere appreciation to outgoing Trustee Steve Rieger for his dedicated service to generations of Alaskans in stewardship of the Permanent Fund.

The Alaska Permanent Fund Corporation is moving forward with a long-standing policy decision to open a satellite office in Anchorage as soon as possible to support the retention and recruitment of professional staff.

Recruitment and retention have been challenging for many employers, including APFC. Opening an additional office in Anchorage, the state’s largest city will broaden the playing field by providing another option for potential employees.

APFC is in the process of securing space in the Cordova Building located in downtown Anchorage.

We look forward to this new opportunity to recruit and retain world-class talent in Alaska.

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The Board would like to ensure Alaskans that APFC is committed to generating a maximum risk-adjusted return to benefit generations of Alaskans through prudent investments across a number of asset classes. Despite difficult market conditions, the Fund has earned positive returns this calendar year.

Alaskans may not realize that the Earnings Reserve Account supports inflation-proofing the Principal for the future and currently supports more than 50% of the state’s operating budget to support essential services and programs, including the dividend program, through the annual percent of market value draw.

In anticipation of a market cycle such as the one we are currently in, the Board of Trustees has been on record for more than 20 years to transition the Fund from its current two-account system to a one unified account system, which would protect the intergenerational sustainability of the Fund to provide for all generations.

The Board of Trustees held a meeting in Anchorage and via webinar on July 12, 2023, to hear updates on portfolio activity, discuss the Anchorage office proposal, review the updated Personnel Management Plan, interview and select an Investment Advisory Group member, and further a strategic planning initiative.

Financial results for the first two months of the fourth quarter were reflective of ongoing market volatility. As the fiscal year has recently ended on June 30, the financial and performance results will be presented at the annual meeting in September once the independent audit and performance reporting are complete.

Given the current high inflationary environment, relatively flat markets, and lower gain realizations, the Board expressed interest in evaluating and addressing the dual issues of how to balance ERA durability in providing an annual draw for state revenue with the need to inflation-proof the Principal to preserve purchasing power and ensure intergenerational benefit. The Board approved staff to develop a Trustee Paper to address some of these issues as an effective tool to inform ongoing conversation and policy dialogue related to the Alaska Permanent Fund.

The Board reiterated its aim to establish an APFC satellite office in Anchorage to support the retention and recruitment of professional staff. In full recognition of the Board’s direction, staff will continue to work to ensure successful implementation including a timeline and process to bring forth funding, while addressing details essential to guaranteeing operational and staff success.

The Corporation’s Personnel Management Plan (PMP) was reviewed as an essential document for ensuring that policies are in place to align with organizational culture and the expectations of accountability for a public corporation. An essential element of the PMP is compensation and salary structure. APFC strives for competitive pay and compensation decisions rooted in a multifactor review of each candidate/staff member. The Board will establish a working group to bring forth pay band compensation recommendations to inform the budget process in September. The same group will also assess alternative work policies outlined in recognition of the modern workplace.

The Board selected Britt Harris, Acting CEO of Texas Permanent School Fund Corporation and Former Chief Executive Officer & President of UTIMCO, to join APFC’s Investment Advisory Group. The purpose of this group, consisting of three advisors, is to provide Trustees with further insights and professional knowledge in the areas of investment management based on proven experience.

Looking forward, the Trustees directed staff to coordinate a strategic planning session in the coming months to ensure alignment in direction.

The Board will be holding a budget work session on September 7 in Juneau. The Annual Meeting of the Board of Trustees will be held on September 27-28 in Anchorage.

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