JUNEAU, Alaska (HedgeWorld.com)–Officials charged with managing the US$28 billion Alaska Permanent Fund will vote May 26 on which hedge fund manager or managers will be part of a pilot hedge funds investment program.
The board of the Alaska Permanent Fund Corp. has scheduled a meeting for Wednesday, at which one of the topics for discussion is a review of hedge fund managers. At that meeting, the board may hire one or more managers to participate in an absolute return pilot program, through which the fund would invest as much as 1% of its assets in hedge funds for 36 months. After that time, the board would have to re-authorize the investment.
Permanent Fund officials announced in March they were starting a three-year pilot program to invest in absolute return strategies. The program includes a 1% target allocation to absolute return strategies.
Board members began learning about hedge funds in May 2003 and during the intervening months heard presentations from a number of hedge fund firms, including McKinley Capital Management Inc., Anchorage, Ala., and Quellos Capital Management LP, Seattle, as well as the fund’s consultant, Callan Associates Inc., San Francisco.
Robert Storer, executive director of the fund, has said the hedge fund program will be conservative, targeting a risk level comparable to U.S. Treasury bonds.
Currently the fund has a target allocation of 55% equities, 32% fixed income, 10% real estate, 2% private equity and 1% absolute return.
The decision to make the hedge fund allocation was made following an asset allocation review. That review also prompted the board to add the 2% allocation to private equity.
Fund officials are hoping to generate a 7.5% return with their investments over the next five years. Combined with an expected 2.6% rate of inflation, that should produce a real return of 5%, according to fund officials.
Contact Robert F. Keane with questions or comments at: [email protected].