Performance Details
Department of Revenue - APFC Operations
Mission
The Alaska Permanent Fund Corporation (APFC) mission is to manage and invest the assets of the Permanent Fund and other funds designated by law.
Core Services
- Achieve the target return within acceptable risk parameters
Mission Results |
Core Services |
||||
|
|
Performance Detail
A: Result -Maximize the value of the Fund |
A1: Core Service - Achieve the target return within acceptable risk parameters |
Target #1: The Fund"s rate of return meets or exceeds the composite investment performance benchmark adopted by the Board.
The Total Fund Performance return for FY2023 was 5.18%. This is measured against the three benchmarks to assess the portfolio"s overall performance. Passive Index Benchmark: This short-term performance indicator is based on a blend of passive indices reflective of a traditional portfolio of public equities, fixed income, and real estate investments. The objective is to earn regularized income to support the Fund"s liquidity needs while outperforming a passive global index portfolio of stocks, bonds, REITs, and US TIPs. In FY2023, the total Fund underperformed the Passive Index Benchmark by 3.6%, representing $2.8 billion. Extending the timeframe over ten years, APFC"s returns over the Passive Index have provided 2.5% in performance value-add or $16.4 billion. This value-added performance reflects APFC"s commitment to actively managing the portfolio on a global scale. Performance Benchmark: This indicator is a blend of indices covering all asset classes, reflecting the Fund"s target asset allocation. Another performance measure entails comparing Fund returns with the performance benchmark on an aggregate and asset class level. Total Fund Return for FY2023 underperformed the performance benchmark of 5.7% by 0.56%. Total Fund Return Objective: The long-term investment goal is to achieve an average real rate of return of 5% per year (CPI/inflation +5%) at risk levels consistent with large public and private funds. This objective was established to consider natural inflation and provide a 5% growth over time. The Total Fund Return Objective for FY2023 was 7.97% (CPI/inflation +5%). Given the Fund`s 5.18% performance, this objective was not met in FY2023 and fell short by 2.79%. This performance objective was not met due to higher-than-average inflation and a general market decline. However, it is important to note that this is a long-term real return objective in recognition that annual performance will vary with both highs and lows. Still, over a long-term horizon, CPI+5% should be attainable and is needed to sustain the Fund`s value. While APFC underperformed in all three benchmarks, it is important to note that the Fund is invested for long-term sustainability and growth. The annual Percent of Market Value (POMV) draw from the realized earnings of the Fund is subject to appropriation by the Legislature. The POMV rules-based structure established in statute (SB 26, CH16 SLA18) allows for an annual draw from the Fund of 5% based on the Fund"s average market value for the first five of the preceding six fiscal years. The POMV revenue distribution significantly contributes to the State"s overall fiscal summary. The POMV draw appropriated to the general fund for FY2023 was $3.4 billion and was used for government services and the payment of dividends, representing approximately 50% of total Unrestricted General Funds. This draw from the ERA represented 135% of the total statutory net income in FY2023. The amount available for appropriation from the POMV distribution is $3.5 billion for FY2024. As we look ahead to the future of the Fund and that of APFC, we must recognize the significant transformation that is happening to both. The State is now looking to the Fund and its management in ways that have not been contemplated before. While our core mission and intent has not changed, to manage and invest the Fund for all generations of Alaskans, we recognize there is an ever-greater need for resources to support the growing Fund and portfolio and secure a reliable income stream for those depending upon it. To ensure the enduring success of the Permanent Fund in producing vital revenues for the State`s General Fund, consideration of structure and distribution methodology remain essential. While positive performance returns were achieved in FY2023, given the current market environment, the amount of income generated through investment activity has decreased compared to previous years. As a result, the spendable portion of the Permanent Fund is being used faster than it is being replenished. The Fund`s current two-account structure, comprised of the Principal and Earnings Reserve Account (ERA), has savings benefits but requires annual inflation-proofing to maintain its ongoing purchasing power. Additionally, appropriations are currently limited to realized income in the ERA. Target Last Modified: 10/25/2023 |
Last refreshed: 04/26/2024 12:00 pm