Alaska oil fund increases budding alternatives allocation

The $39bn fund, which manages income from the state’s oil and mineral resources, has also cut its domestic equity and fixed-income exposure.

The $39.2 billion (€25.2 billion) Alaska Permanent Fund has upped its target allocation to alternative assets, while cutting back its exposure to domestic equity and fixed-income investments.

Late last week, the fund’s board of directors approved a 2 percent increase in the fund’s private equity and absolute return strategy, from 4 percent to 6 percent, according to a statement. The board also authorised a 1 percent increase in its infrastructure and emerging markets allocation, from 2 percent to 3 percent.

Although modest, the latest allocation reflects Alaska Permanent’s growing appetite for alternatives despite its relatively late entry into the asset class.  The fund, which famously makes direct disbursements to Alaskan residents from the state’s oil and mineral revenues, launched its private equity portfolio only four years ago.

Alaska Permanent’s $1.1 billion pre-increase private equity allocation is managed by Pathway Capital Management. As only $344 million of the allocation had been invested as of last year, the fund has not yet released return figures.

The move towards alternatives will be balanced by a reduction in the fund’s investments in US capitalisation stocks and non-US developed market stocks, as well as US bonds. Domestic equity will drop from 27 percent to 26 percent, and domestic fixed income from 23 percent to 19 percent.

Some of Alaska Permanent’s early private equity commitments include $40 million to buyout fund Carlyle Partners V and $40 million to energy-focussed First Reserve Fund XI.