The Alaska Permanent Fund Corporation’s board of trustees voted Wednesday to close its in-state investment program, citing a potential conflict with the board’s overall mission.
Through a program established by the board in 2018, managers directed $200 million from the Permanent Fund’s $76 billion portfolio to be invested in the state. Corporation staff previously reported that in-state investments underperformed the fund’s out-of-state investments, but reiterated at the board’s quarterly meeting on Wednesday that it was too early to judge the results of existing in-state investments.
Still, trustees voted not to add more funds to the program after some raised concerns about its potential problems, including conflicts of interest and the fact that the program may not align with the board’s goal of maximizing investment returns over time.
Four of the six trustees on the board voted in favor of the proposal to close the program. There was only opposition from one trustee – Craig Richards – who favored pausing the program for “a year or two” with the possibility of restarting it if the initial investments were successful. Trustee Eli Rubenstein, a private equity investor, abstained from voting.
Richards is the only current trustee who also served on the board when the program was created in 2018. He said potential conflicts could be avoided as the management of internal investments was outsourced to external fund managers by the corporation’s staff. All other trustees were appointed to the board by Governor Mike Dunleavy in the years since the program was created.
Trustee Steve Rieger, who proposed the resolution to close the program, said the state’s investment could draw similarities to the Alaska Industrial Development and Export Authority, or AIDEA, the state agency that invests in Alaska development projects. He has faced criticism for his failed ventures in the past. A recent analysis found that AIDEA’s investment performance lagged that of the Permanent Fund by billions of dollars.
“The wisdom of expanding or continuing the program has been re-evaluated,” the resolution said. are managed, each set aside $100 million. The proposal states that “no additional money shall be committed to the Alaska In-State Emerging Managers Program.”
Board Chairman Ethan Schutt said after the vote that “there are no changes to the existing program” and that the proposal “is not a condemnation of the investment that has been made.”
But he acknowledged that because Alaska is a small and interconnected state, continued investment in the program would have made it difficult for the board to do its job, even if it relied on outside fund managers, because money from those investments could ultimately benefit trustees. or their family members through their other enterprises.
“Small, very small, given the nature of our state, and our business environment, (in-state investments) could easily touch one or more trustees … and therefore disqualify us from governance,” Shute said.