Alaska examines divestment of Russian private equity holdings

The $81bn sovereign wealth fund is one of the first institutional investors to signal that it is looking at cutting exposure to the country held via a PE portfolio.

Alaska Permanent Fund Corporation (APFC), one of the world’s biggest investors in private equity according to the GI 100, has become one of the first institutional investors to disclose that it is looking into divesting exposure to Russia held in a private equity portfolio.

The Juneau-headquartered sovereign fund, which manages around $15.3 billion across its private equity and special opportunities portfolio, is examining what further steps should be taken regarding its existing Russian holdings.

This includes private equity holdings now worth approximately $3 million, according to a statement.

“The ongoing crisis and tragedy resulting from Russia’s undeniable and merciless assault on Ukraine warrant a global and Alaskan response,” APFC wrote in a statement. “Together with our fellow Alaskans, the board and staff of APFC are bearing witness to the suffering, the fortitude, the resiliency, and the sheer bravery of the Ukrainian people and are hearing the call to action.”

Past calls for divestments of state funds have not been passed by the state legislature, nor were they acted upon by the fund, APFC noted, adding that the Ukraine crisis is “uniquely different”.

It is unclear whether APFC’s Russian PE holdings are direct investments or via its PE fund managers. The sovereign wealth fund has no Russian private equity fund managers in its list of PE managers.

APFC also has around $216 million in stock and bond holdings in Russia, it noted.

The $81.1 billion institution said that divesting any of these assets was likely to be difficult due to markets pertaining to Russian assets being “dislocated” and in some ways “dysfunctional”. It added that valuations could also pose a challenge.

“At this time, the valuation of these assets would be highly speculative given inconsistent market pricing, the continued closure of the [Moscow Exchange] and illiquidity due to applicable regulatory sanctions,” it noted.

The fund added that the value of Russian assets had already deteriorated to “nominal levels”, with liquidity “hindered by severe market restrictions”.

“From a financial standpoint, the harm to the fund has occurred. Effectively, the market has divested itself of Russian assets,” APFC said.

The private equity market has been assessing how the crisis in Ukraine could impact private markets portfolios, and so far divestments have largely focused on public and fixed income holdings.

On Thursday, Northern European buyout giant EQT said its executive committee had recommended the firm and its portfolio companies to “wind down” operations and activities in Russia. The firm’s funds do not own any companies headquartered in Ukraine or Russia, it added.

The crisis has also led at least one GP to review its relationship with an LP with ties to sanctioned Russian oligarchs. London-headquartered Pamplona Capital Management said on Wednesday it was “redeeming” the LP interests held in its funds by LetterOne, a private investment company founded by billionaires Mikhail Fridman and Petr Aven, who were individually sanctioned by the EU this month.