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Department of Revenue
Alaska Permanent Fund Corporation
Results Summary | Details | Questions/Comments
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| | The mission of the Alaska Permanent Fund Corporation (APFC) is to maximize the value of the Permanent Fund within return objectives.
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| | - Investment management for Alaska Permanent Fund assets
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 End Result: |
Strategies to Achieve End Result
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| A1: Develop and implement an asset allocation plan that minimizes the risk necessary to achieve the target return Details > | |
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| A:
Result - Maximize the value of the Fund |
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Target #1: A long-term 5% real rate of return
Status #1: The Permanent Fund FY2009 year end value was $29.9 billion, down $6.6 billion from the prior year with a .6% long-term real rate of return 2000 - 2009, short of the 5% target
Analysis of results and challenges: The Fund's market value was $29.9 billion on 6/30/2009 (after a $857 million dividend payout), down $6.6 billion from the 6/30/2008 ending market value. Fiscal year 2009 was by far the most difficult in the Fund's history. A number of events combined to create a near-perfect storm of economic turmoil. The cooling of of the real estate market after 15 years of growth, combined with the poor decisions at all levels in the subprime mortgage market, started the downward trend in late 2007. Mortgage companies and banks began to fail because their underlying investments lost value, consumer confidence was shaken, investor confidence was shaken, and more importantly confidence in the credit markets was shaken, leading to a freeze-up of the global credit markets. Extremely strong performance for the global stock markets in the years leading up to 2008 suggested that a correction might be due there as well. These combined events shook the global markets to their core and resulted in huge losses wordwide.
The Fund's long-term real rate of return for the period FY2000 - FY2009 was 0.6%. This is only the second 10-year period in Fund history that the Fund did not return at least a 5.0% real rate of return. This performance period included the challenging markets of 2008 - 2009 and the down markets in 2001 - 2003 that resulted from the dot.com collapse. The Fund's annualized real return for 25.5 years, ending June 30, 2009, was 5.5%.
To achieve a target total rate of return, the Board of Trustees manages risk by strategically allocating the Fund among stocks, bonds, real estate, and alternative investments. Different types of assets are influenced differently by factors such as the economic cycle, interest rates, inflation and fiscal policy. A mix of asset types whose returns move out of sync with one another moderates the Fund's total volatility.
Each year the Board fine-tunes its asset allocation to adjust to changes in the long term market environment. Its current goal is to earn 5% over the rate of inflation in the long run.
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| A1:
Strategy - Develop and implement an asset allocation plan that minimizes the risk necessary to achieve the target return |
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Target #1: The Fund's rate of return meets or exceeds the composite investment performance benchmark adopted by the Board
Status #1: For the 10-year period ended June 30, 2009, the Fund outperformed its benchmark by 0.3%. The Fund's total rate of return for the 10-year period was 3.4% compared to our benchmark of 3.1%. Over the 1-year period ended June 30, 2009, the Fund underperformed the benchmark by 1.3%. The Fund's total rate of return for the 1-year period was negative 18.0% compared to the benchmark return of negative 16.7%.
APFC total return versus Benchmark return
| Fiscal Year |
APFC Return |
Benchmark |
| FY 2009 |
-18%
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-16.7%
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| FY 2008 |
-3.6%
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-3.6%
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| FY 2007 |
17.1%
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17.1%
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| FY 2006 |
11.0%
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10.5%
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| FY 2005 |
10.4%
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10.5%
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| FY 2004 |
14.2%
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14.1%
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| FY 2003 |
4.5%
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4.8%
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| FY 2002 |
-2.2%
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-3.7%
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| FY 2001 |
-3.3%
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-4.5%
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Analysis of results and challenges: The Board of Trustees has set an investment goal of a 5% real rate of return over time. The Board crafts an asset allocation that is expected to provide this return within an acceptable level of risk.
Returns are measured against the asset allocation's benchmark. This is a composite figure comprised of the performance of the underlying markets in which each of the Fund's portfolios is invested, weighted for their allocation within the Fund. Total return by itself is not an accurate measure of the Fund's performance, but should be compared to the benchmark, as the benchmark will reflect the market conditions for the period.
While our individual portfolios in most instances performed well against their peers, they trailed their benchmarks leading to underperformance. In particular, the APFC fixed income team took a strategic position and weighted the portfolio toward CMBS products. This is quite different than the composite benchmark and caused underperformance for the period, but is expected to produce benefits in FY2010. Also, the absolute return portfolio was well behind its Libor +4 benchmark, but did very well compared to its peers and had significantly smaller losses than the equities portfolios.
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Current as of Oct 28 2009 10:25:35 |
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