Alaska Permanent Fund Corp., Juneau, could terminate at least 12 of its 17 external small-cap equity managers under a plan to eliminate its $695 million small-cap equity pool, and consolidate other equity managers by significantly increasing passive management of its stock portfolio, confirmed Laura Achee, spokeswoman for the $34.3 billion fund.
The move was made at the fund's quarterly board meeting Feb. 23-24.
“In general, the idea is to streamline the number of managers in the equities portfolio, including those in the small-cap manager pool,” Ms. Achee wrote in an e-mail response to questions.
She wrote the total number of small-cap managers will be reduced significantly — possibly to four, she noted — but “the final decision on how many managers, which managers and on what timeline is still to be determined.”
“We don't expect to change the mandates for any of the managers who are still on board at the conclusion of this process,” she wrote in the e-mail.
As part of its strategy to shift its stock portfolio toward lower-cost, passive strategies, the fund at its quarterly meeting hired Dimensional Fund Advisors for two international small-cap mandates of $200 million each.
“DFA takes a quasi-passive approach to stock management, systematically building portfolios that provide a broad approach to a market rather than actively picking stocks that are expected to outperform,” according to a fund news release.
Ms. Achee confirmed that the fund also aims to reduce the percentage of actively managed stocks to about 55%, from 65%, but added that the 10-percentage-point decrease “isn't set in stone.”
“The decision isn't being driven by the idea of saving fees just to save fees, but rather to make sure that the Alaska Permanent Fund is getting real value out of the fees being spent and to make the best use of the time that internal staff has to oversee the managers in the portfolio,” she wrote.
Separately, the fund hired two managers for its new allocation into mezzanine debt, awarding Oaktree Capital Management and Audax Management $250 million each, according to the APFC news release.
“We believe that mezzanine debt is a good addition to the Permanent Fund's portfolio because it provides returns in line with high-yield bonds, but at lower risk levels,” Steve Frank, board chairman, said in the news release. “As a fund with a long-term investment horizon, we're well suited to take advantage of investments that reward our ability to make longer term commitments.”
The board also hired GMO to run a real-return portfolio with an initial allocation of $250 million to $500 million.
