Alaska Permanent Increases Private Equity and Income While Cutting Real Estate

The Alaska Permanent Fund Corp.’s board of trustees unanimously adopted an updated asset allocation that increases the state sovereign wealth fund’s holdings in private equity and private income while cutting its real estate investments.

The board of the APFC, an independent state entity that manages the assets of the Alaska Permanent Fund, said at its quarterly meeting last week that it is raising its private equity asset allocation to 18% from 15%, and increasing its private income allocation to 10% from 9%. At the same time, it’s reducing its real estate holdings to 11% of its portfolio from 13%, while lowering its allocation to cash and tactical opportunities to 1% each from 2% each.

The fund’s allocation to public equities and fixed income remained unchanged at 32% and 20% respectively, while it maintained its 7% allocation to absolute return investments.

“The fund’s asset allocation targets have been adjusted on the margin to reflect changing market conditions, asset class fundamentals, and existing fund exposures,” APFC CIO Marcus Frampton said in a statement. “I believe that the new target asset allocation for FY 2025 represents a highly efficient and balanced portfolio that is consistent with the return objectives that our stakeholders rely upon.”

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Frampton also said the fund’s total assets rose to $81.8 billion at the end of the first quarter 2024 from $80.3 billion at the end of the fourth quarter of 2023, adding that it continues to outperform both its passive and performance benchmarks over longer-term periods.

“Private markets might have had a tough quarter, but there’s noise in the numbers,” Frampton said. “It’s difficult to look at market returns over the short-term. We’re cautiously optimistic that things will be trending in a better direction next year.”

At the quarterly meeting, APFC Director of Public Equity Investments Fawad Razzaque presented an overview of the public equity portfolio’s asset allocation and manager programs. He said the portfolio employs a scorecard system that evaluates three performance elements: active selection, active allocation and internal and external management.

“We’re pleased that despite a challenging market, our strategies have been successful,” Razzaque said in a statement. “Our equities portfolio continues to add value by beating its benchmark and achieving returns.” Razzaque added that public equities net-of-fee active returns beat their benchmark by 90 basis points per year during the last five years “putting us comfortably above our targets.”