The mission of the Alaska Permanent Fund Corporation (APFC) is to maximize the value of the Permanent Fund within return objectives.
- Achieve the target return within acceptable risk parameters.
|Mission Results||Core Services|
|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
Permanent Fund total return versus Benchmark return
Analysis of results and challenges: Total fund return for FY2020 slightly underperformed the performance benchmark of 2.05 percent by 4 basis points. FY2020's results are substantially below the mid-point of the range of returns since 1985, which have ranged from -17.96 percent to 25.58 percent. In the past ten fiscal years, alone returns have ranged from 1 percent to 20.6 percent, seen in the chart above.
Public markets experienced extreme volatility during the year as the impacts of COVID-19 were felt across the globe. The Fund ended the fiscal year ("FY") at 2.01 percent total return. While representing a strong recovery from the lows experienced in the third quarter, these results were not as strong as the 6.32 percent of FY2019 and were well below the average over the Fund's history.
In FY2020, the total Fund outperformed the Passive Index Benchmark by .73 percent, which represents $476.6 million. Extending the term to five years over the Passive Index, the value-added over the benchmark was 1.19 percent or $3.1 billion. This value-added performance is reflective of APFC's commitment to actively manage the portfolio on a global scale.
The Percent of Market Value (POMV) methodology for Fund withdrawals was established in statute (SB 26, CH16 SLA 18). The POMV rules-based structure allows for an annual draw from the Fund of 5.25 percent for FY2019-FY2021 (stepping down to 5 percent in FY2022) based on the average market value of the Fund for the first five of the preceding six fiscal years.
- This draw is subject to annual appropriation by the Legislature and can be used for any state government service or program, including the dividend program.
- The total POMV draw appropriated to the general fund for FY2020 was $2.9 billion and was used for government services and the payment of dividends, representing 64 percent of total Unrestricted General Funds. The amount available for appropriation from the POMV distribution is calculated at $3.1 billion for FY2021. The POMV revenue distribution is a significant contribution within the State's overall fiscal summary; the draw from the ERA represented 26 percent of the total revenue in FY2020.
- The POMV is designed to create a known and manageable withdrawal structure from the Fund to provide benefits for both current and future generations of Alaskans.
APFC's staff received recognition by The Sovereign Wealth Fund Institute- ranking Angela Rodell, CEO, as fourth in the world on its list of Public Investors 100 most "significant, resilient, and most impactful" executives, Trusted Insight- named Marcus Frampton, CIO, one of its 2019 Distinguished Chief Investment Officers, Investment Officer Magazine- named Mr. Frampton to its Power 100 of 2019, and Chief Investment Officer Magazine- selected Tom O'Day, Fixed Income Portfolio Manager, for its NexGen award.
Additionally, the Alaska Permanent Fund Corporation was recognized by Private Equity International- for Institutional Limited Partner of the Year in 2019 for the third consecutive year, and Pitchbook- as one of the savviest sovereign wealth funds due to its increased allocation to private markets and the growing sophistication of the portfolio.
As we look ahead to the future of the Fund and that of APFC, we must recognize the major 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 transparency and resources in order to secure a reliable income stream for those depending upon it.
Current as of October 13, 2020