Alaska Authorizes Nearly Eight-fold Increase in Public VC Investments

November 21, 2005

The available pool of equity capital grew substantially last Thursday as the board of trustees for the $31.7 billion Alaska Permanent Fund approved the placement of 8 percent of the fund's value into alternative assets, such as venture capital funds and hedge funds. The Associated Press reports the current value of all alternative investments held by the Permanent Fund totals $292 million. With the new authorization target, equity capital could comprise more than $2.5 billion at the fund's present value.

The change will happen gradually, however, as the board increased the mandate to Crestline, the fund’s current absolute return manager, from $250 million to $500 million. The board also increased the allocation for absolute return strategies from 1 percent to 4 percent. The target asset allocation to private equity also is at 4 percent.

Moving more of the public fund into riskier placements is coupled with more secrecy as the board also approved regulations to keep more of the fund's activities confidential. Earlier this year, the state legislature passed House Bill 215, which removed a list of allowable fund investments and authorized less public disclosure of fund activities.

In addition to providing a source of revenues for the state's annual budget in times of fiscal uncertainty, most of the income earned on the Alaska Permanent Fund is used to provide annual checks of approximately $1,000 to each Alaska resident.

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