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Alaska Permanent Fund returns 15.5 percent for FY14

Alaska Permanent Fund Corporation

Alaska Permanent Fund returns 15.5 percent for FY14

AUG 8 - The Permanent Fund returned 15.5 percent for fiscal year 2014 according to preliminary and unaudited figures, ending the year with a value of $51.2 billion after accounting for the annual Permanent Fund Dividend transfer. This is the first time that the Fund has ended a fiscal year above $50 billion, and is a $6.3 billion increase over the closing value for the prior fiscal year.

“In the five years since the recession, the Permanent Fund has almost doubled in value while paying out $4 billion in dividends,” said Michael J. Burns, CEO. “Reaching this new high water mark illustrates the value of the Board’s commitment to building an all weather portfolio, one that may experience downturns in the short term, but over time will provide a stable, prudent level of growth for current and future generations of Alaskans.”

The Permanent Fund’s $21.0 billion stock portfolios had a strong year, and were the primary drivers of the Fund’s returns, with U.S. and overseas stocks producing double digit gains for the period. The U.S. portfolio had positive performance in all four quarters, and returned 27.0 percent for the fiscal year. Although there were some challenges, overall overseas stocks ended the year with gains, leading the Fund’s non-U.S. portfolio to return 20.2 percent, while the global portfolio was up 25.0 percent.

Although the bond markets ended the period with gains, fiscal year 2014 was not an easy one. Careful portfolio construction, including taking on less risk than the corresponding indexes, allowed the Permanent Fund’s portfolios to perform generally ahead of the benchmarks. The Permanent Fund’s U.S. bond portfolio gained 4.8 percent for fiscal year 2014, while the non-U.S. bond portfolio gained 5.5 percent for the fiscal year.

Real estate had a fourth consecutive year of strong positive performance, as the Fund’s $5.9 billion real estate portfolio gained 12.7 percent for the fiscal year.

Absolute return strategies are composed of multiple asset types. The absolute return portfolio was up 5.3 percent for the fiscal year, while real return strategies produced returns of 11.3 percent. The Fund’s private asset portfolios also showed steady gains over the course of the fiscal year, and ended the period with strong returns. The private equity portfolio was up 24.3 percent, while the infrastructure portfolio returned 12.9 percent.

Statutory net income is the amount used to calculate the annual Permanent Fund Dividend. The Fund earned $3.5 billion in statutory net income for fiscal year 2014, and transferred $1.2 billion to the Permanent Fund Dividend Division for the 2014 dividend payment.

The Permanent Fund’s preliminary total return of 15.5 percent trailed the composite benchmark return of 15.7 percent, a result of taking on less risk in the Fund’s investments than the benchmark and other public funds. Final audited returns will be presented to the Board of Trustees at the Corporation’s annual meeting on September 25 and 26 in Juneau.

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