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Alaska considers investing in single-family homes

The $39.8 billion oil endowment will continue to examine a potential $400 million investment to a company that would own and rent single-family homes.

The Alaska Permanent Fund Corporation has approved a continued investigation into a $400 million commitment to a single-family homes strategy as a means of improving the fund's risk/return profile.

Under the strategy, the endowment would not purchase or directly own the properties, but would commit up to $400 million to American Homes 4 Rent, a Malibu, California-based firm that currently owns 1,000 single-family homes. The company would purchase portfolios of vacant homes and manage those assets as rental properties.

“The reported shift in consumer interest from owning homes to renting, combined with the surplus of single-family homes in many markets has created this unique opportunity,” said Bill Moran, chair of the Alaska Permanent Fund Corporation’s board of trustees, in a statement.

The commitment to single-family homes would be made through the fund’s special opportunities allocation, which allows the fund to invest in special investment opportunities across asset classes and to capitalise on market dislocation. The fund currently has an 18 percent target allocation to special opportunities, as opposed to a 19 percent target allocation for real assets, which includes real estate.

At a board meeting in February, Chief Investment Officer Jay Willoughby said he was exploring ideas to enhance the Fund’s risk/return profile, and listed a single-family homes strategy as one viable option, where the endowment would acquire a portfolio of single-family homes from banks at depressed prices and hire a property manager to oversee the assets.

The return from such an investment “could meaningfully exceed any current returns from fixed income,” according to the minutes from the meeting. “Hopefully, in three to seven years the Fund could sell the properties to individual homeowners at a significant capital gain.”

It was unclear at press time if and when the endowment would vote on a commitment to a single-family homes strategy. The Alaska Permanent Fund Corporation could not immediately be reached.