Alaska Permanent Fund Corp., Juneau, may seek additional hedge fund-of-funds and possibly high-yield bond managers.
The $31.6 billion fund has raised its target allocation for absolute-return investments to 4% of total assets from 1% as part of an asset allocation review, said Rick Shafer, CIO. The fixed-income target allocation was dropped to 29% from 32%, he said.
As part of its new absolute-return target, the fund may double its allocation to Crestline Investors, currently its sole hedge fund of funds, to about $500 million, or 1.6% of total assets, he said. Any increase would be subject to negotiations. That portfolio is conservatively invested, with a target return of LIBOR plus 400 basis points and volatility limited to 5%. Mr. Shafer said fund officials will explore other types of absolute-return strategies, but he expects they will seek additional fund-of-funds managers. He ruled out direct hedge-fund investments for the present time.
The fund may also launch a high-yield bond manager search, possibly in February or May, he said. The portfolio size has not been determined. As the fund's first move into non-investment-grade bonds, officials converted existing manager UBS Global's $400 million domestic core portfolio into a core-plus strategy. UBS now will have freedom to invest up to 20% of the portfolio in high yield, emerging market and non-dollar debt, Mr. Shafer explained.
Callan conducted the asset allocation review.