Investment Strategy
Investment Policy
APFC’s Investment Policy provides a transparent, disciplined framework for managing the Fund. It defines performance targets, risk parameters, and evaluation criteria, guiding the Board, staff, and investment partners in balancing growth and stability across all market conditions. By articulating clear objectives, the policy ensures accountability, measurable success, and confidence in the Fund’s long-term sustainability.
Targeting CPI + 5% While Managing Risk
Investment Objectives
The Board maintains a long-term outlook in setting asset allocation and evaluating performance, guided by two key objectives:
- Investment Performance: Ability to generate an annualized return of CPI + 5%, where CPI refers to the Consumer Price Index, a standard measure of inflation, over a 10-year period.
- Investment Risk: Ability of the Fund to achieve the long-term target while conforming to the risk appetite approved by the Board.
APFC’s investment staff operates with broad authority to pursue opportunities within the parameters outlined in the Investment Policy, enabling strategic, efficient decision-making aligned with the Fund’s long-term goals.
Asset Allocation
Guided by the Board’s Investment Policy, APFC manages a globally diversified portfolio designed to meet or surpass benchmarks across market cycles. Asset allocation balances growth and risk while reflecting the Fund’s long-term mandate to serve all generations of Alaskans.
Since its establishment, the Fund’s investments have evolved from solely U.S. Treasury bonds to a broad mix of global assets, including stocks, bonds, real estate, infrastructure, and private companies. This prudent diversification has built a resilient portfolio that delivers strong, risk-adjusted returns over the long term.
APFC’s Board of Trustees evaluates the Fund’s asset allocation annually to ensure it remains balanced, resilient, and positioned to achieve the Fund’s long-term risk-adjusted return objectives.
The Fund’s Eight Asset Classes
APFC’s investment strategy combines disciplined asset allocation with active management within each asset class. The Fund spans public and private markets across eight distinct asset classes, each with a defined investment objective and risk profile. Some asset classes target growth, while others provide stability, liquidity, and income. Together, they enable the Fund to perform across market cycles and remain aligned with its long-term purpose, designed to support long-term growth and maximum risk-adjusted returns.
The Fund is invested across eight distinct public and private asset classes, each with a defined investment objective and risk profile. This structure forms the foundation for long-term performance, with each portfolio actively managed by a team of dedicated investment professionals to optimize results within its investment universe. Broad diversification across markets, countries, and currencies allows the Fund to capture global opportunities while maintaining resilience through market cycles.
Risk Management
Risk is inherent to investing, and understanding it is central to how APFC protects and grows the Permanent Fund. APFC does not seek to avoid risk, but rather to identify, understand, and manage it with discipline, safeguarding Alaska’s financial future through sound, forward-looking practices. APFC targets a long-term average real return of CPI + 5%. The Board evaluates performance over multiple business cycles while maintaining risk levels consistent with those of large public and private funds.
Risk management is supported by experienced staff, quantitative tools, collaborative investment processes, and robust control frameworks. Investment teams serve as the first line of defense, while independent Risk and Compliance functions provide an additional layer of oversight. Key risk metrics include value-at-risk, tracking error, Sharpe ratio, stress and scenario impacts, and concentration levels. Staff monitor these metrics continuously and report quarterly to the Board of Trustees.
Market Risk
Credit Risk
The risk of economic loss arising from a counterparty failing to meet contractual obligations.
Liquidity Risk
The risk that investments cannot be traded at fair value, or that funds cannot be raised at reasonable cost to meet obligations.
Inflation Risk
The risk of losing purchasing power if investment returns fail to keep pace with rising prices.
Operational Risk
The risk of loss from inadequate or failed processes, people, systems, or from unexpected significant events.
Expanding Reach and Expertise
A Partnership Approach
APFC’s investment model combines internal expertise with best-in-class external partners, creating a flexible and agile approach to capturing opportunities worldwide. Through relationships with private and public companies, banks, governments, and other capital managers, APFC gains access to markets and strategies that would otherwise be difficult to reach. External managers provide specialized research, analysis, and management capabilities. This approach allows the Fund to pursue sustainable, risk-adjusted returns that serve the long-term interests of Alaskans.