Fund exec: Market may make dividend bill too optimistic

  • By Matt Buxton
  • Wednesday, June 22, 2016 10:13pm
  • News

FAIRBANKS (AP) — The bill to restructure the Alaska Permanent Fund to help pay for government could be too optimistic about the market, the head of the corporation that manages the fund told the News-Miner editorial board Tuesday.

Angela Rodell, the CEO of the Alaska Permanent Fund Corp., said an annual draw of 5.25 percent of the market value of the fund could be tough to meet every year. That money would come from the fund’s earnings reserve account, not the fund’s principal.

Rodell visited Fairbanks to explain the purpose, history and future of the Alaska Permanent Fund just days after the Legislature adjourned without passing a bill that would reduce dividends to help close a multibillion-dollar budget deficit.

Rodell told the Greater Fairbanks Chamber of Commerce, also on Tuesday, that she had hoped to talk about how the legislation was going to change the permanent fund, but the slide in her presentation was replaced with a large question mark.

The Alaska Permanent Fund Corp.’s Board of Trustees has not taken a position on any of the proposals put forward by Gov. Bill Walker or the Legislature. It did, however, endorse the transition of the management of the fund into a percent of market value model in the early 2000s.

Called POMV, the model allows for a certain percentage of the overall value of the fund to be available to spend each year. The method was contained in the most recent version of the restructuring proposed by the Legislature, allowing 5.25 percent of the value to be drawn. That would actually be less than what the Legislature can currently access from the earnings reserve through a majority vote.

The earnings reserve contains about $7 billion. The entire value of the permanent fund, including both the corpus and the earnings reserve, totals about $53 billion. A 5.25 percent POMV draw would be about $2.5 billion.

Still, Rodell told the News-Miner editorial board at a meeting before the chamber presentation that she has concerns about the ability of the permanent fund to keep up with the 5.25 percent draw.

“Ultimately we are subject to the markets,” she said. “I’m concerned about having to see that expectation year in and year out.”

Rodell said the trustees have a target of 5 percent real return with an additional 2.25 percent inflation but said the fund has missed those goals due to the state of the market lately.

“When I look at actual performance and I hear these numbers thrown around that we’re going to make 7.25 percent so we can take 5.25, it makes me stay awake at night to figure out how we are going to thread this needle,” she said.

Rodell said she understands the political need to meet that goal and stressed that it highlighted the need for the corporation to be able to make smart investments, as she explained at the chamber.

“That’s why we’re focused on getting the resources we need to continue to invest in these sectors,” she said.

Most of her presentation to the chamber was a basic overview of the permanent fund and the corporation’s investment methods.

She cleared a common misconception that the Alaska Permanent Fund Corp. is responsible for the dividend. The Department of Revenue, not the corporation, handles the payouts.

The Alaska Permanent Fund is also broadly invested, she explained. That includes owning a “small piece of Snapchat,” a popular picture-sharing social network, through an investment firm.

The corporation has also begun investing abroad. It owns the Golden Square Shopping Centre in Warrington, England, which Rodell said has put extra attention on this week’s vote for the United Kingdom to exit the European Union.

More in News

Emerson Kapp, second-place winner of the 2023 Caring for the Kenai competition, shows participants how to use her project, the Kenai Peninsula Maze Board, during the Kenai River Festival on Friday, June 9, 2023, at Soldotna Creek Park in Soldotna, Alaska. (Jake Dye/Peninsula Clarion)
Kenai River Fair to offer education, fun for free on June 8

Kenai Watershed Forum’s annual summer event gets new name, renewed focus on education

A sign marks the entrance of Centennial Park and Campground on Tuesday, Nov. 9, 2021 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Tree planting event set for Centennial Park

Planting trees in the area is a crucial method for protecting and rehabilitating the streambank, organizers say

Alaska State Troopers logo.
1 dead, 3 missing after boat capsizes near Seward

Alaska State Troopers were notified by the U.S. Coast Guard of an overturned vessel around 1:30 p.m. on Wednesday

Erosion of the Kenai bluff near the Kenai Senior Center. (Photo by Aidan Curtin courtesy Scott Curtin)
Ribbon-cutting for bluff stabilization project set for June 10

The bluff has been eroding at a rate of around 3 feet per year

A bag of freshly dug razor clams is held aloft at the Ninilchik Beach in Ninilchik, Alaska, on Saturday, July 1, 2023. (Jake Dye/Peninsula Clarion)
No clamming in Ninilchik or Clam Gulch this year

Adult abundance “well below” fishery thresholds on both beaches

Poppies are affixed to wreaths during a Memorial Day ceremony at Leif Hanson Memorial Park in Kenai on Monday. (Jake Dye/Peninsula Clarion)
Remembering the sacrifices of the fallen

Speakers ask community to be inspired through sacrifice of service members

A fallen tree reaches onto Kalifornsky Beach Road in Soldotna, Alaska, as cars drive by on Friday, Sept. 1, 2023. (Jake Dye/Peninsula Clarion)
Grants, borough to support HEA effort to mitigate dangerous trees

HEA will have permission to enter borough land and the borough’s right of way

Assembly President Brent Johnson asks questions of representatives of the Kenai Peninsula Borough School District during a joint work session of the School Board and Kenai Peninsula Borough Assembly in Soldotna, Alaska, on Tuesday, April 2, 2024. (Jake Dye/Peninsula Clarion)
Borough to enter contract for asbestos flooring abatement in 3 central peninsula schools

The work will be done at Kenai Central High, Kenai Alternative High and Sterling Elementary schools

Most Read