Permanent Fund gains 6.48% in first three months of 2019

The Alaska Permanent Fund rebounded from a tough finish to 2018 with a 6.48% quarter that put the $65 billion fund back in positive territory for the year.

The gains in the quarter that ended March 31 — the third quarter of the Alaska Permanent Fund Corp.’s fiscal year — gave the fund a 3.07% investment return for the 2019 fiscal year so far, according to a May 23 APFC releasd’s five-year private equity return is 24.3%.ned 10.1% over the period.

The fund held $65.8 billion of assets under management with approximately $1.6 billion of liabilities as of March 31. It ended the 2018 fiscal year last June 30 with a balance of $64.8 billion, from which the state appropriated roughly $2.7 billion to pay out Permanent Fund dividends and support government services.

Most recently, the fund had a net balance of $65.3 billion with slightly more than $19 billion in the Earnings Reserve Account, which is the portion of the fund state lawmakers can appropriate from.

Calculated as 5.25% of the fund’s five-year average value, the fiscal 2020 percent of market value, or POMV, appropriation is expected to be roughly $2.9 billion.

Legislators are currently debating whether or not to make an additional draw from the Earnings Reserve that would be outside of the POMV appropriation — despite warnings from financial advisors about the long-term impacts of such ad-hoc draws — in order to pay the larger Permanent Fund dividends that Gov. Michael J. Dunleavy demands.

The latest 6.48% quarterly return was driven by “an outstanding” 12.36% return on the fund’s public equities or stocks, portfolio, which comprises about 40% of fund investments, the APFC release states. For comparison, the Dow Jones Industrial Average gained 10.1% over the period.

The fund’s $15.5 billion fixed income portfolio generated a 5.77% return during the quarter. The public market investments slightly outperformed the corporation’s return benchmarks for the given categories, according to fund managers.

However, the fund’s private investments did not fare so well “due to the nature of quarterly appraisals and valuations,” the release states, but still outperformed comparable benchmarks.

The $8.5 billion private equity portfolio returned 1.25%, compared to a Cambridge Private Equity Index return of -0.53% during the quarter. APFC leaders note the fund’s five-year private equity return is 24.3%.

The fund’s infrastructure and private real estate investments similarly netted quarterly returns in of about 0.2% but have proved much more fruitful over the long haul.

“These negative short-term distortions are not reflective of the generally strong underlying fundamentals, occupancy and cash flows of the properties,” the APFC release states regarding real estate investments.

Real estate has generated a 7.97% annual return over the previous five years, according to fund managers.