Alaska Permanent’s direct investments take hit amid tech turmoil

The lag in private markets looms over LPs.

Alaska Permanent Fund reported that the bucket of its private equity portfolio that tilted heavily to direct investments fell by 1.6 percent during the last quarter of 2021.

LPs are bracing for plunging private equity valuations as traditionally lagging private markets catch up with the public market turmoil. The weakness in Alaska’s special opportunities holdings could portend bad news for firms with exposure to more exotic investment structures.

Alaska’s special opportunities basket is focused on direct investments in venture capital and buyout deals, along with co-investments and stakes in investment firms.

According to Greg Allen, CEO of consulting firm Callan, who reviewed the fund’s performance at the board’s quarterly meeting on Wednesday, the special opportunities bucket suffered largely due to its exposure to biotech companies.

“This is the worst year biotechs have had in over a decade,” Allen said.

Alaska has roughly $15 billion dedicated to private equity, with $5 billion of that allocated to its special opportunities bucket.

Some of the larger direct biotech investments made by Alaska include a $148.8 million commitment to Denali Therapeutics in 2015 and a 2014 commitment of $128.9 million to Juno Therapeutics, its most recent report said.

In 2020, Alaska made $73.5 million in commitments to five biotech companies through the Altitude Life Sciences Ventures Side Fund IV. The companies in this investment include Generate Biomedicines, Inzen Therapeutics, Laronde, Ring Therapeutics and Tessera Therapeutics.

The value of traditional private equity assets rose by 4.6 percent for the quarter. This trailed behind the Cambridge Private Equity Benchmark, which had a return of 5.14 percent for the final three months of 2021.