Permanent Fund Corp. earns $5.1B in 2018 fiscal year

The Permanent Fund continued its rapid growth during the 2018 state fiscal year by gaining $5.1 billion, or 10.7 percent, and nearly reaching $65 billion in value.

The state fiscal year ended June 30.

Alaska Permanent Fund Corp. CEO Angela Rodell said Alaskans could take pride in the returns the corporation is achieving for the Fund — even if many are at the same time frustrated with how it is being used.

This spring the Legislature and Gov. Bill Walker approved Senate Bill 26, which called for the state to make a draw of 5.25 percent of market value, or POMV, on the Fund’s Earnings Reserve Account to drastically pay down the state’s ongoing budget deficits and pay dividends while at least temporarily ending their three-year debate over how to best employ the Fund’s earning power.

The 2019 draw approved in SB 26 was calculated to a roughly $2.7 billion deposit from the Earnings Reserve to the General Fund that was split for the dual purposes.

About $1 billion will go toward paying dividends of $1,600 per eligible resident with the remainder to the state budget.

“As the state begins a program of relying on the Fund in new ways, APFC’s ability to add value and secure compelling investment opportunities while diversifying and controlling risks has never been more important,” Rodell said in a formal statement.

The Permanent Fund Board of Trustees had long advocated for instituting a POMV approach to using the Fund’s earnings because it is a proven way for the state to generate revenue for government services while providing key predictability for Fund managers.

Strong market returns have bolstered the Fund the past couple years; it gained 12.6 percent in 2017.

Its 8.9 percent five-year return is 2.1 percent above the corporation’s passive benchmark return goal of 6.8 percent for the period and about 2.4 percent above the APFC Board of Trustee’s return objective of 6.5 percent.

Specifically, the Fund ended the 2018 fiscal year with a total value of $64.9 billion with $46.1 billion in principal — $40.2 billion of constitutionally protected deposits and $5.9 billion in unrealized income — and another $16.4 billion of net income in the Earnings Reserve Account. The ERA also held $2.4 billion in unrealized gains, according to APFC.

The Fund’s $7.3 billion private equity portfolio led the strong performance with a 32.7 percent return for the year.

Public equities, the largest portion of the Fund’s investments at $26.9 billion, returned 11.7 percent in 2018 and have averaged 9.5 percent returns over the past five years.

This story has been corrected to accurately reflect the growth in the Permanent Fund. The original version incorrectly stated the Fund grew by $6.3 billion in fiscal year 2018. Statutory net income, which flows to the Earnings Reserve Account, was $6.3 billion, while the overall value of the Fund grew by $5.1 billion.

Elwood Brehmer can be reached at [email protected].

08/03/2018 - 10:01am