Alaska sets aside $500m for private equity investments

The $30bn Alaska Permanent Fund has earmarked $500m for private equity investing in fiscal year 2010. In February, the fund cancelled hundreds of millions of dollars in recommended commitments to private equity and infrastructure funds.

The Alaska Permanent Fund, the US state's $30 billion oil and gas endowment, has set aside $500 million for private equity investing in fiscal year 2010.

The permanent fund's board voted last week to set its 2010 allocation to private equity and also gave the investment staff greater flexibility to directly manage the private equity portfolio.

The private equity commitment is significant for Alaska because the fund in February pulled back on hundreds of millions of dollars in planned commitments to infrastructure and private equity funds that had been approved last July.

At the February meeting, the fund's board canceled a planned $250 million commitment to Alinda Capital Partners' second infrastructure fund, Alinda II, which is targeting $3 billion, according to the Probitas Partners 2008 Private Equity Deskbook. The board also rescinded a planned $400 million commitment to private equity funds through the creation of a single investment vehicle to be set up by investment firm Pathway Capital Management. The buyout fund of funds, to which only Alaska could contribute, would specifically only target private equity funds investing in companies valued at $1 billion or less.

The board cancelled the commitments because of a decline in the value of the fund and “the need to balance toward core asset classes”. The fund's assets were valued at $28.8 billion on 31 December, down $4.2 billion from the value on 30 September. The fund stood at $40 billion in October 2007.

The total value of the fund stood at $27.4 billion at the end of the third quarter for fiscal quarter 2009, down $1.4 billion at the start of the quarter. As of 21 May, the fund’s total unaudited value was $30.2 billion.

“It's too early to say we're out of the woods, but it feels good to have seen a few weeks of positive returns,” Michael Burns, chief executive officer of the fund, said in a statement. “We're not calling the bottom of the market yet, but we are hopeful that the worst is behind us.”

Alaska has a 6 percent allocation to private equity, 3 percent to infrastructure and 6 percent to absolute return strategies.