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Sovereign Wealth Funds

Alaska Permanent approves new compensation plan, reflecting move to more internal management

Alaska Permanent Fund Corp., Juneau, developed new incentive compensation guidelines for investment and other staff, said Paulyn Swanson, spokeswoman, in an email.

The $65.1 billion sovereign wealth fund's board at its meeting on May 24 approved the new guidelines, part of a five-year investment management plan unveiled in September 2016 to significantly increase the assets it manages internally. At the time, internally managed assets accounted for 24% of overall assets, and the goal was to increase it to 40% to 50% over the next five to 10 years. As of June 30, 2017, internally managed assets accounted for 38% of assets.

Ms. Swanson said the next step is to seek budget authorization from Gov. Bill Walker and the Alaskan Legislature when they convene next session.

According to the new guidelines, investment staff, including Chief Investment Officer Russell Read, would be "compensated through a base salary plus annual incentive compensation targeted at median total cash compensation in comparison to the APFC peer equivalent," according to board meeting materials. The peer equivalent will be a weighting that reflects "75% of U.S. and Canadian public fund asset managers with internal/direct asset management capability and 25% of the private-sector investment organizations with assets under management of less than $100 billion, including endowments, foundations, advisory firms, banks, insurance companies and corporate plan sponsors," according to the materials.

Annual incentive compensation, meanwhile, would be measured net of fees on a three-year basis vs. the relative performance benchmark. No incentive compensation would exceed 50% of the individual's base salary. APFC's board would include incentive compensation requests with their annual budget requests beginning in fiscal year 2020.

The fund in September 2016 announced it would also aggressively pursue more investment staff, promoting from within as well as seeking external candidates. In the fiscal year 2019 operating budget, there are four new investment positions and six new middle- and back-office support positions, Ms. Swanson said.

"Moving more investments in house requires an increased investment in both the investment staff and those that offer investment support, such as IT, accounting, trade operations and administration," Ms. Swanson said. "As presented in the budget documents, the investment positions are two investment officers and two investment associates."