Firms & Funds

Alaska Permanent’s PE program drives strong returns

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Alaska Permanent Fund, private equity, pension fund
U.S. Navy safety swimmers stand on the deck of the Virginia class submarine USS New Hampshire after it surfaced through thin ice during exercises underneath ice in the Arctic Ocean north of Prudhoe Bay, Alaska March 19, 2011. REUTERS/Lucas Jackson (UNITED STATES - Tags: MILITARY) FOR BEST QUALITY AVAILABLE: ALSO SEE GM1E73U0AH201 - RTR2K80E
  • Private equity is 11.7 pct of the fund
  • 5 new co-investments in the last 9 months
  • Co-investments deliver net IRR of 64 pct per year

Alaska Permanent Fund Corp’s $7.6 billion private equity portfolio returned 18.94 percent, the highest among all asset classes for the nine months ended March 31.

The $64.59 billion fund continues to take direct control of the program and build out its co-investments.

The PE portfolio generated 24.38 percent over the 12 months and has averaged 22.05 percent over the past five years.

Since 2014, Alaska Permanent made 23 co-investments, with total gains exceeding $1.4 billion as of March 31. The co-investment portfolio has delivered a net IRR of 64 percent a year over five  years, the release said.

The fund’s PE allocation almost doubled to 11 percent in 2017 from 6 percent in 2013. Actual allocation stood even higher, at 11.7 percent as of March 31, 2018, a fund release says.

Recent co-investments are with Dyal Zeus Co-Investment Partners, Quantum Energy Partners and Centerbridge Partners. The fund has made a direct investment in Foundation Health, documents show.

Earlier this year, Alaska Permanent made a 9.9x cash-on-cash return on the sale of Juno Therapeutics, its co-investment with Crestline Investors, fund documents show. Celgene acquired Juno for $87 a share, or $9 billion.

Other co-investments included the IPO of Denali Therapeutics. The IPO returned 2.8x on its investment. Anthem Inc’s acquisition of HealthSun returned 2.9x and Indigo’s private financing returned 1.9x, documents show.

Alaska Permanent decided to internally manage a part of its PE portfolio through direct and co-investments in 2014. Prior to this, the fund built exposure to private equity through funds-of-funds.

By 2017, the staff-led portfolio had outpaced the portfolio managed by external managers. New fund investments by staff amounted to $604 million, 14.6 percent more than the $412 million of external investments in 2017, pension documents show.

Earlier this year Alaska Permanent announced the creation of an entity called Capital Constellation. Other partners in Capital Constellation include RMPI Railpen, the U.K.’s largest pension fund, and investment adviser Wafra on behalf of Public Institution for Social Security of Kuwait, the country’s national retirement scheme.

Alaska Permanent Fund’s PE team includes Steve Moseley, chief investment officer, and Yup Kim, senior portfolio manager. The team wants to hire an associate in private equity and special opportunities, its website shows.