JUNEAU, Alaska -- The $22.1 billion Alaska Permanent Fund Corp. will seek legislative approval to raise its equity limit to 60% from the current 50%.
In an another legislative matter, a proposal would transfer the investment management of the city of Fairbanks' new permanent fund to Alaska Permanent.
The Budget and Audit Committee will introduce a bill allowing the more flexible allocation when the Legislature convenes Jan. 12, said Rep. Terry Martin of Anchorage.
A similar bill failed in a legislative session held earlier this year, when the Legislature adjourned before voting on the bill.
Mr. Martin, who is vice chairman of the joint Senate-House committee, favors increasing the fund's investment flexibility. He complained the current limitation is too stringent and harms the fund's investment returns.
He said the limit requires the fund to sell stocks to stay at the 50% maximum equity level. The fund has incurred a big opportunity loss as the markets have risen, he said.
The fund had to sell $600 million in stocks in the fiscal year ended June 30 to stay at the 50% limit, said Jim Kelly, director-communications.
The fund since then hasn't had to sell any stocks, but it is exactly at the 50% limit now.
"Even if the fund didn't raise its 50% allocation, a raise in the limit would give the fund more flexibility," Mr. Martin said. "It would mean the fund wouldn't have to keep selling stocks whenever they go over the 50% limit.
"We are restraining the fund and harming its return.
"It's a changing market; it's a volatile market. The fund has to have the flexibility to make adjustments."
The fund's current allocation is 50% equities -- which consists of 36 percentage points domestic and 14 percentage points international -- 43% fixed income -- including 2 percentage points international -- and 7% real estate equity.
Its targets are 48% stocks, 42% fixed income and 10% real estate.
The fund has no restriction on international investments, other than the bounds on total equities.
The fund is restricted to 15% real estate. But Mr. Kelly said the fund executives haven't asked to increase that because it is far above the fund's 10% real estate target.
Another bill in the coming legislative session would transfer investment management of the Fairbanks Permanent Fund to the Alaska Permanent Fund.
The Fairbanks fund started this year with proceeds from the sale of municipal utilities. The total is estimated to be $90 million.
The money is being run currently by the Alaska Municipal League Association investment pool.
According to a legislative memorandum, the Fairbanks fund would pay the Alaska fund a fee to cover investment management, custody, reporting and administration. The amount is unspecified but could be a pro-rata share of the Alaska's fund's total cost. Fairbanks officials couldn't be reached for comment.
The memorandum suggests that if the Fairbanks bill is successful, a number of other municipal funds could seek to have their investment management transferred to the Alaska Permanent Fund.
Mr. Kelly said officials of the Alaska Permanent Fund have been neutral on the Fairbanks proposal. They are concerned about taking on a responsibility unrelated to the permanent fund's primary fiduciary objective, which is preservation of the Alaska fund and the management of the assets in a cost-effective manner.
