Trustees Assess Market Outlook and Opportunities for Real Estate

In Board of Trustees, Uncategorized by Paulyn

Juneau – The Board of Trustees held its quarterly meeting at the Elizabeth Peratrovich Hall in Juneau and simultaneously via webinar on May 19-20, 2021, to review the performance of the Alaska Permanent Fund through the third quarter of fiscal year 21 (FY21), review risk metrics, assess the capital markets outlook, incorporate updates in the investment policy, get an update on pacing plans for Real Estate and Alternative Investments, and focus on the Real Estate portfolio.

Chair Bill Moran remarked that “the growth of the Alaska Permanent Fund is unprecedented. We must put this unparalleled growth into context and recognize it is not sustainable. Recessions are likely in our future and will have a negative impact on the Fund, which will impact the State.  Knowing that the State now gets more than 70% of its revenue from annual withdrawals from this Fund, we must remain diligent in managing and understanding our portfolio risk.”

The total value and the stellar performance of the Alaska Permanent Fund continue to dominate the fiscal year-to-date narrative. Through the third quarter of FY21, a period beginning July 1, 2021 and ending March 31, 2021, the Alaska Permanent Fund continued to exceed established performance benchmarks and projections, increasing to a total value of $76.3 billion, which represents an increase of more than $11 billion since the beginning of the fiscal year.  The total Fund return through the third quarter of FY21 was 22.69% and 5.95% for the individual quarter ended March 31; this was fueled mainly by public and private equity markets.  Callan reports that this performance placed the Total Fund above the median relative to the performance of other public funds and large endowments/foundations.

The Real Estate portfolio plays a unique and essential role in APFC’s investment portfolio in terms of diversification, regular cash flow income, and long-term growth. As an inflation-resistant cash yield, Real Estate tends to embody characteristics of both debt and equity, where lease payments resemble fixed income obligations. At the same time, the property’s residual value contains equity-like attributes. While the asset class has struggled in recent years, it remains central to the investment portfolio for the Fund.

“The successful growth of the Fund’s Real Estate portfolio up to the ultimate target allocation of 12% over the next four years is a key focus for the Investment Team.  High quality private Real Estate investments held directly or through open-ended funds remains one of the most attractive inflation-protection cash yielding investments in the market today,” commented APFC CIO, Marcus Frampton.

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