JUNEAU, Alaska - Trustees of the $18.7 billion Alaska Permanent Fund Corp. restructured $1.8 billion in equity assets - more than 10% of the $18.7 billion fund - tilting away from active management.
Among the changes, equity assets managed passively, both in domestic and international, more than doubled - to 35% from 17%.
The fund gave two new assignments to an existing passive manager, dropped three active managers, increased the assignments of two managers and reduced the assignments of four active managers.
Under the new allocation, equity is now 48% of total assets, up from 45%. The number of active equity managers was cut to 10 from 13.
The fund expects to complete the restructuring by early July.
The new plan "is designed to increase the fund's long-term returns by slightly increasing the amount of investment risk," according to Grace Berg Schaible, chair of the board of trustees.
"Bottom-line performance should improve, primarily by increasing the fund's allocation to equities, but also partially by significantly reducing our manager fees' operating costs."
The moves are part of a three-year asset allocation plan adopted by the trustees, according to Jim Kelly, director-communications.
Trustees hope the moves will raise risk-adjusted return while reducing costs.
"With the potential for higher returns," the fund might have "a greater degree of year-to-year volatility," Eric E. Wohlforth, vice-chair, noted in a statement.
"Fortunately, this increase in volatility will narrow as the investment time horizon is lengthened, which fits well with the fund's role as a long-term investor."
The fund's 42% in domestic and international fixed income and 10% in real estate were unaffected.
Bankers Trust Co., New York, an existing passive manager, was the major beneficiary in the restructuring. It was hired for two new passive assignments and won an increase in an existing assignment.
It will run a new $304 million Standard & Poor's 1000 index fund, which combines the S&P 400 midcapitalization equity index and the S&P 600 small-cap index, and it will run a new $787 million Morgan Stanley Capital International Europe Australasia Far East index fund.
In addition, trustees increased Bankers Trust's existing S&P 500 index fund to $2.1 billion from $1.5 billion.
The fund increased the international active equity assignment of Clay Finlay Inc., New York, to $339 million from $215 million.
The fund dropped:
Alliance Capital Management L.P., New York, which ran an active $332 million domestic equity portfolio and an active $257 million international equity portfolio;
Goldman Sachs Asset Management, New York, which ran an active $254 million domestic equity portfolio; and
UBS Asset Management (New York) Inc., which ran an active $138 million international equity portfolio.
The fund reduced the assignments of:
Ark Asset Management Co., New York, dropping the $516 million active international equity portfolio it ran, while retaining its $646 million active domestic equity portfolio;
RCM Capital Management, San Francisco, cutting its active domestic equity portfolio to $1.1 billion from $1.4 billion; and
Chancellor Capital Management Inc., New York, cutting its $840 million active domestic equity portfolio to $790 million.
