Fund managers seek more transparency with state's money

Permanent Fund, retirement board push for more openness in wake of economic downturn

Posted: Tuesday, February 17, 2009

The state of Alaska's top money managers are moving toward more openness with their hedge fund and other secret investments.

The change comes in the wake of the Madoff investment fund scandal and a stunning decline in stock markets, both of which played a role in the Alaska changes.

Investment managers for the Alaska Permanent Fund Corp. and the Alaska Retirement Management Board say they're shifting their policies to require openness, and taking advantage of the downturn in markets to do so.

The Bernie Madoff scandal, one of the nation's largest Ponzi schemes where $50 billion in hedge funds was lost, brought new attention to the issue of secret investments.

Permanent Fund and ARM Board managers currently won't say in which funds they're invested, but say that Madoff's funds weren't among them.

Gary Bader, chief investment officer for the Department of Revenue and the ARM Board, said it is time to do away with the secrecy.

"We need to work on providing greater transparency to the members and the public in order to keep their confidence," he said.

The ARM Board manages about $15 billion in state money.

The Permanent Fund has come to agree, said Mike Burns, its executive director.

"For a fund like ours that has thrived on transparency, long-term it is not going to do very well if we don't make it more transparent," he said.

The $28.5 billion Permanent Fund makes available its list of "fund of fund" managers, but not the 196 hedge funds in which they place the money.

Sometimes, where they place money is a business strategy in itself, Burn said.

The ARM Board's Bader said that when it began investing in hedge funds, sometimes top managers wouldn't handle their money if it had to be disclosed.

"The investment managers had very strong hands," he said.

At the Permanent Fund, Burns said a hedge fund manager once walked away from an opportunity to invest $250 million in Alaska's money for fear it would become public.

Now, times have changed Bader and Burns say, with the sellers no longer controlling access to hot funds.

"I think it is more of a buyer's market today," Burns said.

Juneau journalist Gregg Erickson, editor-at-large of the Alaska Budget Report, first called attention to the issue of secret investments in 2005 in a column in the Empire.

He praised the goal of more transparency, and said that if it was ever the case in which hedge funds had to be offered secrecy, that was no longer the case.

"I don't think there's any need for that today," he said.

The Permanent Fund's Burns said it would be doing the same thing as the ARM Board, and telling its fund managers that if they do business with Alaska the names of their funds would be public, but only as contracts come up for renewal.

"It's going to take some time, he said.

Bader said he expected it would take a year to get all of its fund managers public.

"Hopefully in a year to this day we will have no relationships that are not available for inspection by the public," he said.

• Contact reporter Pat Forgey at 586-4816 or

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