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Permanent Fund flat for Fiscal Year 2012

AUG 2 - According to preliminary data released today by the Alaska Permanent Fund Corporation, the Permanent Fund’s investments returned 0.02 percent for the fiscal year ending June 30, 2012, and closed with a value of $40.3 billion. This was up $193 million from the end of the prior year, and the Fund outperformed the composite benchmark return of -0.2 percent.

“It was a volatile year for the global stock markets, particularly overseas markets,” said Michael Burns, CEO. “Stocks make up about half of the Fund’s investments, so they had the largest impact on our performance. However the bond and real estate portfolios performed quite well over the course of the fiscal year, helping mitigate the poor performance from stocks and creating a positive return for the Permanent Fund.”

In the first quarter of the fiscal year stock markets were sharply down, feeling the drag of slow growth domestically and political and economic turmoil overseas. Markets then appeared to return to normal, rallying through the second and third quarters, especially in the U.S. But overseas markets were shaken by continuing woes and fell into double digit losses in the fourth quarter, creating a net negative return for the stock portfolio despite positive returns in the U.S. markets.

The Fund’s U.S. stock portfolio returned 2.3 percent. The non-U.S. portfolio returned -14.6 percent while the global portfolio returned -4.7 percent.

Continued concerns over the stability of Eurozone sovereign debt, along with slowing growth in emerging market countries drove investors to the U.S. As a result, U.S. bonds returned 7.8 percent. Compared to stocks, even non-U.S. bonds still seemed safe to investors by comparison, and the portfolio returned 6.5 percent.

Real estate also performed well over the year, and preliminary results show the Fund’s investments returned 11.4 percent. Final audited performance results for real estate and the other asset classes will be available at the Board’s annual meeting in September.

The Fund’s absolute return portfolio was flat at 0.4 percent for the fiscal year. This portfolio includes funds that specialize in absolute return strategies, distressed debt, mezzanine debt and other directed investments. The real return portfolio returned 5.7 percent for the period. This portfolio is comprised of five portfolios, with each manager allowed to set their asset allocation within the risk parameters set by the APFC. This allows them to select from the same range of asset types found within the rest of the Permanent Fund. Private equity returned 9.8 percent for the fiscal year and infrastructure returned -8.4 percent.

The Permanent Fund earned $1.6 billion in statutory net income in fiscal year 2012. Statutory net income is comprised of rent from the Fund’s real estate properties, dividends from stocks, interest from bonds and any net gains from the sale of assets. This is the amount used to help determine the Permanent Fund Dividend, using a statutory calculation based on a five-year average of statutory net income. Based on the calculation, APFC will transfer $605 million to the Permanent Fund Dividend Division for the fall dividend payment. The dividend distribution transfer in 2011 was $801 million.

The Board will review the Permanent Fund’s final audited performance and financial statements at its annual meeting in Anchorage on September 26 and 27.

unaudited, as of Aug 1, 2012
US Bonds $7,321,500,000
US Stocks $6,341,300,000
Non US Stocks $7,160,000,000
Global Stocks $4,881,700,000
Non US Bonds $830,300,000
Real Estate $4,487,200,000
Cash $497,700,000
Alternatives $6,357,200,000
Real Return/External CIO $2,981,200,000
TOTAL $40,858,100,000

 

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