Alaska Permanent Fund Corp., Juneau, approved a dramatic overhaul of its asset allocation that combines stocks, corporate bonds and private into a new “company exposure” category and creates separate categories for government bonds and cash.
In addition, the fund’s board authorized searches for up to four real return managers, each running $500 million, according to a news release from the $30.2 billion fund.
CEO Michael Burns could not be reached for comment by press time.
The new asset allocation is: 53% in company exposure, comprising stocks, corporate bonds and private equity; 21% in an opportunity pool that includes absolute return and distressed debt; 18% in real assets, comprising real estate, infrastructure and TIPS; 6% interest rates, comprising government or government-related bonds; and 2% cash.
The previous target allocation was 26% U.S. stocks, 19% U.S. bonds, 14% global stocks, 13% non-U.S. stocks, 10% real estate, 6% for both private equity and absolute return, and 3% for both non-U.S. bonds and infrastructure.
“We’re taking a fresh approach to how we view our asset allocation,” Mr. Burns said in the news release. “We’re recognizing that some investments within an asset class may have more in common with other asset types with regard to expected risk and return. And since our goal at the highest level is to balance the risk and return of the total portfolio, it makes sense to segregate assets by their characteristics, rather than simply by type.”
The real return asset class is a new one for the fund. Managers will invest in the same range of assets as the permanent fund, and they will be required to structure their portfolios to meet a 5% real target with the same risk level as the Permanent Fund.
Mr. Burns said in the news release that the move will create “mini-funds” within the permanent fund.
“Not only will there be the benefit of a portion of the fund having the same risk and return profile as the entire fund, but we’ll also be able to see their approach to asset allocation, how it differs from our approach and how our results compare,” he said in the news release.
Callan Associates will assist with the searches.
Separately, the board committed $500 million to private equity in 2010 and gave greater flexibility for fund staff to manage the portfolio directly.
