Alaska Shoots for $3 Billion in Private Markets Investments Next Year

Robust growth anticipated for its direct and co-investment strategies across private equity, private credit, and infrastructure.

The Alaska Permanent Fund Corp. is gearing up for one of its most robust investment years yet, with almost $3 billion on the agenda to be allocated towards investments in private markets strategies.

The sovereign wealth fund agreed to invest or commit approximately $1.6 billion under its private equity and special opportunities umbrella, with the flexibility to go over or under the target by $550 million, depending on opportunities.

The team also agreed to engage about $1.3 billion to the private income portfolio, with the flexibility to shoot around the target by $300 million. It’s a bit slower than its FY 2019 target, due to the portfolio’s allocation as a percentage to the overall fund being a bit over target. The two allocations will be spread across fund commitments, direct investments, and the fund’s highly profitable co-investment strategy, which Chief Investment Officer Marcus Frampton explained how he managed to attain a 60% return with CIO a few weeks ago.

“APFC does try to maintain a largely stable deployment pace across private markets year-to-year without really attempting to “time the cycle” on the new deployment side,” Frampton said on the plans.

For more stories like this, sign up for the CIO Alert newsletter.

Private equity and private incomes are expected to generate annual net returns of approximately 12% and 7.25%, respectively. Growth of the APFC’s private equity exposure is illustrated below:

The fund intends to increase its private equity allocation through direct and co-investments, while at the same time lowering the portfolio’s concentration towards commitments to growth equity funds, and direct ownership stakes in general partnerships.

On the side of its private income exposure, which spans infrastructure, private credit, and income opportunities, the portfolio has grown considerably over the past few years with a particular focus on growth within its infrastructure allocation.

The two pacing plans assume a net growth rate for the fund of about 2% for the next few years.

Frampton recently joined CIO for an informative podcast on the fund’s portfolio and his opinion on today’s market conditions. You can listen to the podcast here.

Related Stories:
Exclusive: With Five-year Returns Higher than 60%, New CIO Discusses Alaska’s Co-Investment Success

Marcus Frampton: New Sheriff in Juneau

Tags: , , ,

Apollo’s Leon Black Laments Going Public

Lagging share price vexes PE kingpin, who says investors just don’t understand the firm.

Leon Black, CEO and founder of Apollo Global Management, has second thoughts about taking the private equity titan public eight years ago. It seems investors just don’t get poor Apollo and undervalue its stock.

Asked at an investing conference whether he has any regrets about going over to public ownership—its IPO was in March 2011—Black replied: “Regrets? Absolutely … The public market doesn’t understand creatures like us very well.”

A whole array of big-time PE firms have gone public over the last decade. But shares of Carlyle, Blackstone, and KKR, as well as Apollo, have underperformed the S&P 500 and other stock indexes. Since its public offering, Apollo has gone up 69%, while the S&P 500 has climbed 255%, FactSet data indicates.

“I think we trade at half where we should be,” Black said, according to a Pitchbook account. “It’s not just true of us; it’s true of Blackstone and others.”

The allure of public ownership was that the principals could monetize their stakes right away, employees would gain incentives, and a PE firm would get the capital to expand globally. The downside, of course, was scrutiny and meddling by regulators and investors.

For more stories like this, sign up for the CIO Alert newsletter.

Lately, Apollo and other public PE shops recently have tried to remedy their lagging share prices by switching from partnerships into C corporations, on the idea that they’d then be included in indexes and mutual funds.

The first to do this was KKR in May 2018. That seems to have worked out well: Its stock surged 33% until September, when it ran into the fourth-quarter down market. And despite last month’s slippage, KKR still is up 19% from the IPO.

Since the announcement it was switching to a C corp format, Apollo’s stock has slipped 4%, but that may be due to the recent downdraft. KKR, which announced its conversion a few weeks before, is up 5% since.

Related Stories:

Apollo Is Converting to C Corp Structure

Apollo Secures $24.6 Billion for Largest Private Equity Fund Ever
 
Why Private Equity Amps Up Takeovers of Public Companies

Tags: , , , ,

«