Alaska Legislative Digest’s Tim Bradner interviews Deven Mitchell, APFC Executive Director.
A Historic Alaskan Moment
Alaskans came together in November of 1976 to approve the establishment of the Alaska Permanent Fund through a constitutional amendment. 4 years later, it was decided how the Fund should ultimately be invested and managed.
On April 8, 1980, Governor Hammond signed SB161, establishing the Alaska Permanent Fund Corporation. This bill provided the mandate to safeguard the Principal and prudently manage the investment of the Permanent Fund for the maximum risk-adjusted return.
This important moment in Alaska’s history highlights the vision and perspective of those who worked tirelessly to protect our vital financial resources, setting the State on a course to support generations of Alaskans.
APFC’s Board of Trustees Regular Meeting Overview
Anchorage – The Board of Trustees held a regular meeting in Anchorage and via webinar on April 12, 2023, to hear updates on portfolio activity, further conversations on the Fund’s Asset Allocation and the in-state private equity investment program, review elements of the Public Equities portfolio, and consider the Corporation’s peer group definition for compensation.
Board of Trustees Meeting – April 12, 2023
The Alaska Permanent Fund Corporation’s (APFC) Board of Trustees will hold a meeting on April 12, 2023 in Anchorage at the location identified in the agenda linked below. Agenda items include: continuation of In-State Private Equity discussion, Public Equities asset class update, Investment Advisor Presentation, Legislative update, and more.
The public is invited to attend this meeting in person, via Webinar (information listed above), or telephonically. There will be an opportunity for public comment and participation at 8:30 a.m. when the meeting commences on April 12, 2023. If the public wishes to sign up for public comment, please indicate so when registering via WebEx. Please sign-up for public testimony by emailing jloesch@apfc.org by noon April 11.
April 12, 2023 APFC Board of Trustees Meeting Agenda
April 12, 2023 APFC Board of Trustees Meeting Packet_with updated Resolution 23-01
Hedging against inflation with Global Rates
High inflation and rising interest rates have been making headline news for the past year. Inflation occurs for several reasons, but it doesn’t necessarily happen in every country to the same degree or at the same time. In 2022, while the US Federal Reserve and central banks worldwide began aggressively increasing interest rates to fight inflation, some countries saw more varied rates and conditions.
For more than a decade, APFC’s internally managed Global Rates portfolio has provided an opportunity for the Permanent Fund to participate in fixed income markets outside of the US with the intention of adding global diversification and interest rate protection to the total Permanent Fund portfolio.
APFC Statement Regarding U.S. Technology Banking Sector
Last week, U.S. banking regulators closed Silicon Valley Bank, a bank that specialized in commercial banking for the technology sector. Over the weekend, federal entities took measures to ensure that the depositors of Silicon Valley Bank would be held harmless. At this point, a handful of additional banks are experiencing substantial distress or have also been closed by banking regulators. These banks include Silvergate, Signature Bank, and First Republic.
The Alaska Permanent Fund Corporation has exposure to these banks in the form of passive investments in index funds. As of December 31, 2022, the market value of these investments totaled $7.6 million. The total market value of APFC investments on December 31 was $74.4 billion.
The APFC understands that many of the portfolio companies in its private equity portfolio used Silicon Valley Bank for operating purposes. As of today, APFC understands that those companies’ deposits have been guaranteed by the federal government.
“The APFC is a fully diversified global investor,” stated Executive Director Deven Mitchell. “At any point in time, some sector of the economy can experience distress.”
Chair Ethan Schutt stated, “The Board of Trustees is committed to maintaining prudent diversification of its investments. While the U.S. and global economies continue to make progress toward emerging from the global pandemic, we should not be surprised by periodic reversals in various sectors.”
The APFC will continue to closely monitor this situation.
APFC’s Board of Trustees Q2 Meeting Overview
Juneau – The Board of Trustees held its quarterly meeting in Juneau and via webinar on February 15, 2023, to review the Alaska Permanent Fund’s second-quarter investment performance, discuss the upcoming annual asset allocation, consider in-state investments, and assess risk management metrics.
Chair Ethan Schutt provides that “the Alaska Permanent Fund’s ongoing success relies on the Board’s and staff’s abilities to provide a long-term risk-adjusted return to benefit generations of Alaskans. This maximum return threshold is best achieved through market-driven decisions, benchmarked performance, and an effective asset allocation based on targeted returns.”
During the meeting, a thoughtful discussion was led by guest speakers, Alaska Senator Stedman and Alaska Representative Edgmon, on the importance of the Corporation’s independence and appropriate oversight. The supportive dialogue also focused on the importance of ongoing outreach and education about the intergenerational benefit of the Fund and its ability to generate annual state revenue. It was acknowledged that given the two account structure, both inflation-proofing to maintain the purchasing power of the Principal and the durability of the Earnings Reserve Account warrant ongoing attention.
Board of Trustees Meeting
The Alaska Permanent Fund Corporation’s (APFC) Board of Trustees will hold a Quarterly Meeting on February 15, 2023, from 8:30 am to 4:15 pm. The public is invited to attend this meeting in person, via Webinar (information listed in the agenda below), or telephonically.
Please see the agenda for more details.
February 15, 2023 APFC Board of Trustees Quarterly Meeting Agenda_REVISED2
February 15, 2023 APFC Board of Trustees Quarterly Meeting Packet_REVISED2
FY23 Mid-Fiscal Year Review
Entrusted as stewards and fiduciaries of the Permanent Fund, APFC’s vision and diverse investment strategies complement the long-term investment horizon for the Fund.
“I fully understand and appreciate the importance of protecting this vital resource for the benefit of both the current and future generations of Alaskans,” says APFC Executive Director Deven Mitchell.
United by the shared values of integrity, stewardship, and passion, the Board and staff of the Alaska Permanent Fund Corporation are committed to safeguarding, prudently managing and investing the assets of the Permanent Fund in service to Alaska and partners worldwide.
Read APFC’s Perspectives FY23 Mid-Fiscal Year Review
APFC and the business of taking risks
“The fundamental premise of risk management is accepting that there are inherent uncertainties in the longer-term pursuit of making money,” says Sebastian Vadakumcherry, APFC’s Chief Risk and Compliance Officer. “Understanding and appreciating how much an investor could expect to lose can lead to better investment decisions.”
Most investment institutions have a target return or benchmark goal that they are trying to achieve. To meet or exceed those goals, institutional investors need to take risks with their capital. With the understanding that the same level of return can be earned with varying levels of risk, risk management helps to achieve targeted returns with the lowest level of risk.