Alaska’s Permanent Fund lost more than three billion dollars in the first quarter of fiscal year 2012, the Alaska Permanent Fund Corp. announced Wednesday.
That could mean a big hit for next year’s and future years' dividends, depending on whether the losses are made up during the remainder of the year.
The fund ended the quarter Sept. 30 at $37 billion, down $3.1 billion from where it had been at the start of the quarter and fiscal year on July 1.
Permanent Fund Executive Director Mike Burns stated in a release the decline in markets had been somewhat expected after big gains in the previous year, in which it had a return of 20 percent, one of the fund’s best years ever.
“Bull markets don’t last forever,” Burns said.
Dividends are calculated from a formula based on “realized” earnings after stocks or other investments are sold, not on interim market values. PFD amounts are also based on a five-year average of earnings, and other factors.
In the first quarter of the fiscal year, Burns said stocks had been the biggest losers for the quarter. Last year, they were the big winners.
Foreign stocks lost nearly 20 percent, while U.S. stocks lost more than 16 percent.
And even while the overall Permanent Fund portfolio was down 8.3 percent for the quarter, the fund’s $7.6 billion U.S. bond portfolio, mostly managed in-house, returned a positive 1.8 percent for the quarter. The much smaller foreign bond holdings did even better, earning 3.3 percent.
The Permanent Fund’s hedge fund holdings also helped hold off some of the downturn’s effects, with those investments doing much better than the market, losing only 2.7 percent.
Despite the quarter’s downturn, Burns said the Permanent Fund would not be adjusting the portfolio because of the downturn, and the Permanent Fund’s Board of Trustees doesn’t “chase returns” by trying to guess what will be the next hot market.
“Our board builds an all-weather portfolio that doesn’t change to reflect market conditions,” he said.
That may have already begun to pay off. In October the Permanent Fund began climbing again, and is currently at $38.8 billion.
This story has been changed to note that the losses this year could also affect dividends in future years.
• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com
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Comments (14)
Add commentHigh fives
Weren't they all patting each other on the back and giving high fives all around just last quarter? No doubt some big bonuses were paid as well. Will those bonuses be revoked this year when the fund stinks it up?
Bonuses?
Bonuses? What bonuses? Who does the Permanent Fund pay bonuses to? It's internal investment teams don't get bonuses and as far as their external investment managers go, they pay fees to the manager based on the amount of assets that firm manages for the Fund. I believe they even get a price break from the external managers for having more money under managment, but I don't know for sure (I though I read that in an earlier article about the Fund, but it has been awhile now). How that external manager decides to compensate their employees is really up to them, isn't it?
Wall Street Crooks
where did the money go and who has it now?
What do you expect from a
What do you expect from a failed banker who spends hundreds millions on bad advice which all ways has Alaska following the market all the way to the bottom. When was the last time you saw the royalty income from the States oil shown on the Permanent Fund’s income or balance sheet handouts.
Remember Gov. Parnell is responsible for their appointments and keeping him in office. Past time to make change. A change from Parnell down.
3.1 BILLION REASONS TO INVEST
in GOLD!
We are experienceing inflation. At least gold would keep us even.
Fire the CEO. Next.
!
:0
short and small
To Burns’ apologist,
Income is income and should be recognized on the income statement. Not comingled somewhere else
@ AKgasman
I agree with your statement that the mineral royalties should be shown on the Permanent Fund's finacial statements and the idea that they might not be was extremely concerning to me. I took a few minutes and checked out their website. I found the amount (State Dedicated Revenues Receivable $58.9 - dollars in Millions) on their "Monthly Finacial Statements" report that is listed on their homepage.
Since the Fund's homepage is pretty thick with info, here is the link to the statements so that you can take a look for yourself.
http://www.apfc.org/_amiReportsArchive/APFC201109.pdf
It can also be found on page six of the Fund's annual report
http://www.apfc.org/_amiReportsArchive/APFC%20Annual%20Report%202011.pdf
I am glad to see that they are indeed posting the amount of mineral revenues. I have always been impressed with the transparency of the Fund since I took a field trip to their offices through one of my business classes at UAS. It makes me feel a lot better to have verified this fact for myself, and I thank you for raising the question.
Norway has...
$500 billion in their sovereign fund?
@ Johnny b good
Salaries and fees are clearly posted on the last page of the annual report. Yes, I had to go look for them, but they weren't hidden.
$59 million does add up
The $59 million is far, far too low. It should be closer to $700 million where did the royalty oil funds go? More to come.
$59 million
The $59 million was the amount on their MONTHLY financial reports. Their ANNUAL report showed a much higher number - something like $870 million in mineral revenues for FY11. Respectfully, AKgasman, it seems that all of the numbers you are concerned about are right there for anyone to see if they are willing to take the time to look.