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The Alaska Permanent Fund Corporation hopes to grow its resources to at least $100 billion by making better and bolder investments.
A strategic plan released last month outlines those goals, including pursuing changes to state laws, revising investment philosophy and, more importantly, whether to borrow billions of dollars to generate growth. ing.
“The strategic plan will guide APFC’s future decisions and we hope to ensure opportunities for public participation before the February meeting,” Deven Mitchell, APFC’s chief executive and executive director, said in a news release. “It’s an important part of the process.” release.
Alaska Permanent Fund interest income generates funds that the Alaska Legislature uses for both dividends and state services. However, there are growing concerns about how sustainable earnings reserve accounts are and whether they will be enough to generate funds for dividends in the coming years.
The APFC is proposing to borrow 5% to 10% of the fund’s value and put it into the fund itself, increasing the fund to $100 billion.
“APFC may be able to use leverage as a strategic investment decision by borrowing capital with the purpose of generating returns in excess of the cost of borrowing over the long term,” the strategic plan states.
However, additional investments “increase risk and must be evaluated tactically and strategically during implementation to increase overall risk-adjusted net returns.”
The total value of the fund was $77.38 billion as of Dec. 31, including $56.7 billion in principal and $12.2 billion in unrealized gains.
An additional $1.9 billion remains uncommitted to the revenue account, approximately $3.7 billion is committed to a percentage of fiscal year 2025 fiscal year market value, $1.4 billion to anti-inflation for the current fiscal year, and approximately $1.5 billion to Includes unrealized dollar gains.
The fund’s yield was about 3.54% as of Dec. 31, and about 9.39% over the past five years.
The strategy states that legislation needs to be changed and legislative support is needed to invest more assets and investment options.
The plan proposes opening offices in 48 U.S. countries or overseas, which would “expand APFC’s presence in the heart of financial markets and support the recruitment and retention of field professionals.” It will be possible.
Another key element is the exclusion of the selection of top officials from open meeting laws, which could be seen as a step back to transparency.
“Access to the most qualified candidates for executive director and chief investment officer positions will be enhanced if applicants to these positions are not required to disclose their applications to their current employers. ‘, the plan states. “However, the Open Meetings and Public Records Act provides that a complete list of candidates for these positions may be made available to the public, and the final candidates interviewed by the Board for these positions are An open interview process will be required.”
This change would require a change in state law.
The plan also has other goals, including adding a “competitive incentive compensation structure” to retain retiring staff and increasing communication and awareness among Alaskans about the importance of the fund. It’s targeted.
The strategic plan touts the fund’s growth over the past decade with increased private equity investments, which account for approximately $15 billion of the fund’s value. However, APFC lacks clarity on the entire list of portfolio companies.
The strategic plan is open for public comment until February 14, and most of those who have already commented question the logic behind the plan’s goals.
Fairbanks resident Richard Seifert called the whole concept of borrowing money to grow the endowment “hunting around” in the state’s giant nest egg.
“This latest concept, which exposes a significant amount of the fund to unusual and dangerous levels of risk and justifies the move as capable of increasing the fund’s total value to $100 billion, is nothing short of a fairy tale. Pretty fanciful,” Seifert wrote on January 26th.
He said this was a risk to the state’s future, “to our future political and economic security…and it is simply not wise, not conservative, and seems to reflect the thinking of sports bookmakers.” ” he said.
North Pole resident John Boyarski said the company was moving too quickly and without a clear explanation of the desired outcome.
“We need to do more public relations and explain exactly what we are going to do in clear and plain language that the average Alaskan can understand,” Boyarski wrote. “This proposal should not be made until it is explained to the people of Alaska in clear and simple language. Stop talking about business jargon and financial markets.”
Molly Sherman of Fairbanks strongly opposed limiting public comment and transparency regarding the executive director hire.
“Opening up the inner workings of government strengthens a vital institution, and making APFC’s employment practices transparent to the public makes APFC more durable and able to withstand the ever-changing winds of political action.” ,” Sherman wrote. “An open selection process for senior officials is particularly important and in the public interest, especially since these positions are ultimately subject to the governor’s appointment discretion.”
To view the 2024 Strategic Plan, visit apfc.org. Public comments can be submitted via email to boardpubliccomment@apfc.org. APFC asks that comments include the individual’s name and city of residence. The APFC Board of Directors will also meet on February 15th and 16th to adopt the plan.
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