Alaska Permanent Fund co-investments deliver record-breaking returns

  • AUM: $64.9 billion
  • Target allocation to PE/Growth Opportunities: 14 percent
  • Actual allocation to PE/Growth Opportunities: 11.3 percent
  • PE strategy: In the 2017 annual report, Alaska Permanent Fund said it would increase the PE share of its overall portfolio from 11.3 percent to 14 percent.
  • Key advisers/consultants: Callan Associates Inc
  • Whom to contact for a meeting: Paulyn Swanson (
  • Why this is important: Alaska Permanent Fund’s PE and special-opportunities portfolios produced the highest annual return of any asset class in the fund’s 38-year history.

Alaska Permanent Fund Corp’s private equity and special-opportunities portfolio has brought in the highest annual return of any asset class in the fund’s 38-year history, a recent news release said.

The Alaska legislature in 1980 established the firm as a quasi-state entity tasked with investing and managing the assets of Alaska Permanent Fund, which is one of the first sovereign-wealth funds and the largest of its kind in the United States.

At present, it has $64.9 billion in assets under management.

Overall, the fund’s report for fiscal 2018 ended June 30 showed exceptional results, with the fund’s unaudited value climbing 10.7 percent for the year. That equates to a $5.1 billion return on investments.

But it was the PE portfolio that stole the show. Together, the PE and special-opportunities portfolios, valued at $7.3 billion, generated returns of 32 percent in fiscal 2018. Taken on its own, private equity posted a 27.9 percent return for the fund, a figure that significantly outperforms the Cambridge Private Equity benchmark of 18.3 percent.

“Alaskans can be proud of the performance and investment returns that Alaska Permanent Fund Corporation is generating for our state,” CEO Angela Rodell said in a statement.

“As Alaska begins a program of relying on the fund in new ways, [our] ability to add value and secure compelling investment opportunities while diversifying and controlling risks has never been more important.”

In the news release, the state attributed these successes in part to a change in the fund’s investment policy five years ago, when the board expanded the strategy to also include co-investments.

Since co-investments are managed by internal staff rather than outside managers, the fund has been able to mitigate its carried-interest and management-fee expenses.

Beginning with infrastructure projects in 2013, the fund’s staff have gone on to invest a total of $913 million across 19 different co-investments as of December 2017.

One transaction in particular — the fund’s co-investment in Celgene’s recent acquisition of Juno Therapeutics — made a 9.7x cash-on-cash return.

The co-investment program has delivered a net internal rate of return of 68 percent annually since its inception, the news release said, a drop from the figure of 71.4 percent cited in the 2017 annual report.

Alaska’s PE activities this year have included seven commitments to funds such as Whitehorse Liquidity Partners II LP, Kelso Investment Associates X LP, and Lightspeed Venture Partners Select Fund III LP.