Permanent Fund earnings fall short of investment goal

The Alaska Permanent Fund Corp.’s investment earnings were again less than withdrawals in the 12 months ending in June, according to preliminary data scheduled to be released at the corporation’s annual meeting this week in Anchorage.

The corporation, which manages the $74.9 billion Alaska Permanent Fund, earned a 5.18% return, less than its goal of 7.97%.

Since 2018, an annual transfer from the Permanent Fund to the state treasury has been Alaska’s largest source of general-purpose revenue, paying for dividends and public services across the state.

To make that transfer sustainable in the long term, investment managers need to average 5% plus the rate of inflation.

Over the past five fiscal years — since the transfer was written into state law — the fund has returned 7.93%, below the 8.91% target.

In part because withdrawals have exceeded earnings for four of the past five years, the spendable portion of the Permanent Fund is dwindling and could be exhausted within four years, independent observers have said.

Performance rose significantly for the fiscal year that ended June 30, but Chief Investment Officer Marcus Frampton said that the Permanent Fund missed out on most of the stock rally caused by artificial intelligence-linked technology companies.

From Jan. 1 through June 30, the S&P 500 index was up 16.9%, but just 10 stocks, including Apple, Amazon, Microsoft, Nvidia, Tesla and Google, accounted for 80% of those returns.

Callan, the independent firm contracted to provide third-party analysis of the Permanent Fund’s performance, noted that the S&P’s value is now more concentrated than at any point since the 1970s.

In slides presented at the annual meeting this week, Callan concluded that the Permanent Fund performed in line or slightly better than average among large endowments nationally last year, but worse than most large public pension funds.

CalPERS, the largest public pension fund in the nation, reported 5.8% returns during its just-completed fiscal year. California’s retirement fund for teachers, the second-largest in the country, returned 6.3%.

Nationwide, state and local government pension funds reported a median return of 8.3%, according to a Wilshire Trust Universe Comparison Service reported by the Wall Street Journal.

The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.