Permanent Fund gains 6.48 percent in Q3

  • Trader Gregory Rowe laughs with fellow traders as he works on the floor of the New York Stock Exchange, on May 1. The public equities, or stocks, portfolio for the Alaska Permanent Fund Corp. returned more than 12 percent in the third quarter of the fiscal year that ended March 31. After losing 3 percent in the first half of the year, the fund returned to positive territory thanks to its third quarter performance. (Photo/Richard Drew/AP)

The Permanent Fund rebounded from a tough finish to 2018 with a 6.48 percent quarter that put the $65 billion fund back in positive territory for the year.

The gains in the quarter that ended March 31 — the third quarter of the Alaska Permanent Fund Corp.’s fiscal year — gave the fund a 3.07 percent investment return for the 2019 fiscal year so far, according to a May 23 APFC release.

Permanent Fund investments lost 3.19 percent of their value in the first half of the state fiscal year.

The fund held $65.8 billion of assets under management with approximately $1.6 billion of liabilities as of March 31. It ended the 2018 fiscal year last June 30 with a balance of $64.8 billion, from which the state appropriated roughly $2.7 billion to pay out Permanent Fund dividends and support government services.

Most recently, the fund had a net balance of $65.3 billion with slightly more than $19 billion in the Earnings Reserve Account, which is the portion of the fund state lawmakers can appropriate from.

Calculated as 5.25 percent of the fund’s five-year average value, the fiscal 2020 percent of market value, or POMV, appropriation is expected to be roughly $2.9 billion.

Legislators are currently debating whether or not to make an additional draw from the Earnings Reserve that would be outside of the POMV appropriation — despite warnings from financial advisors about the long-term impacts of such ad-hoc draws — in order to pay the larger Permanent Fund dividends that Gov. Michael J. Dunleavy demands.

The latest 6.48 percent quarterly return was driven by “an outstanding” 12.36 percent return on the fund’s public equities or stocks, portfolio, which comprises about 40 percent of fund investments, the APFC release states. For comparison, the Dow Jones Industrial Average gained 10.1 percent over the period.

The fund’s $15.5 billion fixed income portfolio generated a 5.77 percent return during the quarter. The public market investments slightly outperformed the corporation’s return benchmarks for the given categories, according to fund managers.

However, the fund’s private investments did not fare so well “due to the nature of quarterly appraisals and valuations,” the release states, but still outperformed comparable benchmarks.

The $8.5 billion private equity portfolio returned 1.25 percent, compared to a Cambridge Private Equity Index return of -0.53 percent during the quarter. APFC leaders note the fund’s five-year private equity return is 24.3 percent.

The fund’s infrastructure and private real estate investments similarly netted quarterly returns in of about 0.2 percent but have proved much more fruitful over the long haul.

“These negative short-term distortions are not reflective of the generally strong underlying fundamentals, occupancy and cash flows of the properties,” the APFC release states regarding real estate investments.

Real estate has generated a 7.97 percent annual return over the previous five years, according to fund managers.

Elwood Brehmer can be reached at [email protected].

05/29/2019 - 8:32am