APFC’s Board Reviews Fiscal Year 2022 Performance and Looks to the Future

In Uncategorized by Paulyn

Anchorage – The Board of Trustees met for their Annual Meeting this week to review the Alaska Permanent Fund’s investment performance for fiscal year 2022 (FY22) and hear strategic insights, including current market perspectives from the Investment Advisory Group, APFC staff and external investment partners.

Chair Richards remarked that, “The past year has been challenging, and despite it all, the Fund had excellent performance returns amidst volatile markets. The Corporation remains strong and staff are committed to advancing our vision. The Board and staff look forward to continuing to excel in our investment management role.”

As confirmed in the FY22 Annual Report, the Alaska Permanent Fund closed the fiscal year with a value of $76.3 billion, resulting from a Total Fund performance of -1.32%. The change in Fund value from the previous fiscal year, FY21, of $81.9 billion is related to global market volatility and the annual 5% draw from the Fund.

At the meeting, the expertise of APFC’s professional staff was highlighted for their work of diligently identifying interesting opportunities and generating returns greater than the passive index and our peer group indices. With record high inflation, the Fund underperformed its’ total return benchmark objective of CPI+5% for the fiscal year. Looking at performance over a longer horizon, the Fund outperformed all three target benchmarks over the 5, 10, and 20-year periods.

In their presentation, Callan, APFC’s Investment Consultant, illustrated the outperformance of the Permanent Fund in comparison with other large public funds. They noted that the Total Fund placed in the top quartile relative to other large public funds, and above median relative to a large public funds and a large endowments/foundations peer group.

Marcus Frampton, APFC’s Chief Investment Officer, states, “I continue to be pleased by the outstanding investment performance our team has now delivered across a range of market environments.  This exemplary performance is perhaps best illustrated by Callan Associates Large Public Fund Peer database, which places APFC in the top decile of peers for virtually all relevant time periods ranging from the last quarter to the last 20 years.”

Fiduciary Responsibility
At the meeting, facilitated fiduciary training was held to ensure that the Board has access to the knowledge and information necessary to fulfill their duties as Trustees of the Alaska Permanent Fund. The training was consistent with the objective of the Trustee Education Policy and covered the principles established in Alaska Statute 37.13.120, which outlines the APFC Board’s fiduciary responsibility of investing and managing the assets of the Alaska Permanent Fund. Additional information was shared regarding the Alaska Executive Branch Ethics Act and the processes the Board can use to identify and disclose potential ethics conflicts.

Proposed Budget
As a public corporation, APFC recognizes the importance of efficiently and effectively achieving our mandate of managing the assets of the Permanent Fund to generate the maximum risk-adjusted returns. In recognition of that effort, the Board approved a proposed FY24 operating budget focusing on recruitment and retention, extracting cost savings through internal management of Fixed Income, and ensuring informational technology needs are met. Work is also commencing on updating and redesigning aspects of the Incentive Compensation policy to strengthen its effectiveness in meeting the retention and recruitment challenges. The approved budget proposal will now be sent to the Office of Management and Budget for the Governor’s review and consideration. The Governor’s budget for all public agencies, including APFC, will be introduced to the Legislature by December 15th for consideration during the upcoming legislative session.

Asset Allocations and Global Challenges
The Board invites members of the APFC Investment Advisory Group and external partners to present on topics of general interest to institutional investors, such as APFC. At the meeting, John Skjervem, a member of the APFC Investment Advisory Group, gave the Board an interesting presentation on Climate Change, Divestment, and Energy Transition as they relate to financial investments. A presentation was also given by APFC staff and external partner, Albourne, who shared ongoing trends and an outlook for the hedge fund industry. With respect to industry standards, APFC’s internally managed absolute return portfolio continues to meet all performance expectations while providing the Fund with a stream of uncorrelated and defensive returns that offer better liquidity than other alternative investments.

 Executive Director Search
A representative from People AK presented the progress made in the effort to hire a new Executive Director to lead the Corporation. They announced that final interviews are expected to be held at a Special Meeting of the Board of Trustees on October 3rd, 2022 in Juneau.

Corporate Elections
As part of Annual Meeting protocols and consistent with APFC’s Bylaws, the Board elected their corporate officers during the meeting. Trustee Ethan Schutt was elected to Chair and Trustee Steve Rieger to Vice-Chair of the APFC Board. Assignments to the Governance and Audit Committees will be posted on our website at a later date. The Board also approved a revised 2023 and new 2024 meeting schedule.

Annual Report
KPMG completed the financial audit for the Fiscal Year 2022 and presented its findings to the Board. There were no matters to report, and action was taken by the Board to approve the audited financial statements. The full audit is available in APFC’s Annual Report.

Learn more about the Alaska Permanent Fund and the Alaska Permanent Fund Corporation’s strategies, investments, financial statements, and people in the 2022 Annual Report that is now available and can be viewed online at annualreport.apfc.org.

The next regular meeting of the Board is December 7-8, 2022 in Juneau and via Webinar.