Alaska’s money managers are off to a solid start in the first months of the state fiscal year.
The Alaska Permanent Fund Corp. announced Monday that it earned a 3.86 percent return, or $2 billion, in the first quarter of the 2017 fiscal year on its namesake fund, which had a total balance of $54.8 billion on Sept. 30. Of that, $9.7 billion was in the Fund’s Earnings Reserve account.
The Fund ended the 2016 fiscal year with a total value of $52.8 billion. As of Oct. 31, $1.15 billion of the Earnings Reserve balance is unrealized income, which represents the appreciation of assets not converted to cash.
The state fiscal year started July 1.
“Diversification among asset classes and geographies, each with meaningful long-term expected returns has delivered a combination of strong overall investment earnings with only modest portfolio volatility on both a short- and long-term basis,” said Permanent Fund Corp. CEO Angela Rodell, a former state Revenue commissioner, of the first quarter results. “We will continue to identify and secure those opportunities worldwide which can deliver these benefits to the people of Alaska for many years to come.”
As of Oct. 31, the Permanent Fund’s balance stood at $54.6 billion, down 0.36 percent in October, according to its unaudited monthly report.
The principal of the Fund, built largely on a portion of historical state resource royalties, was at $45.1 billion at the end of the quarter.
The strong quarter followed a tough 2016 fiscal year, in which market losses early in the fiscal year led to a 1.02 percent overall return.
Gov. Bill Walker’s legislation to reallocate a portion of investment earnings from the Fund to pay for state government — that passed the Senate and died in the House Finance Committee — called for an annual draw equal to 5.25 percent of the total Fund value. Similar proposals will assuredly be debated in the upcoming legislative session.
The Fund’s rolling 12-month return stood at 9.75 percent at the end of the first quarter, better than both its three-year and five-year averages of 6.83 percent and 9.10 percent, respectively.
The highest quarterly yield came from foreign stocks at 7.86 percent, which comprise 17 percent of Fund investments. Domestic and global stocks each make up 12 percent of the portfolio and both had returns greater than 5.6 percent, according to the quarterly report.
Real estate holdings, which account for 11 percent of Fund investments, returned 2.27 percent.
Traditionally safe U.S. bonds — 19 percent of the portfolio — earned 1.2 percent for the first quarter of the state fiscal year and 6.35 percent over the 12 months ending Sept. 30.
Elwood Brehmer can be reached at email@example.com.