Fund to adopt new strategies

Trustees hire Crestline Investors to manage up to $500 million

Posted: Friday, March 02, 2007

The Alaska Permanent Fund will adopt some new investment styles, trying some profitable but potentially risky new strategies to make money, its board of trustees decided Thursday,

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The trustees, in Juneau for their only meeting of the year here, hired manager Crestline Investors to manage as much as $500 million of the $37 billion permanent fund in alternative investments. The fund is typically invested in stocks and bonds.

Permanent Fund Corp. Executive Director Michael Burns said new investments, such as Crestline's Distressed Opportunities Fund, will help the permanent fund diversify its holdings and potentially bring big returns.

Alternative investments also have the benefit of frequently taking a different direction than stocks and can actually reduce volatility in the fund.

Burns said big profits have been made in past economic downturns, and Crestline sees opportunities developing again.

"We think it's a repetition of history," Burns said. "There will be tremendous opportunities."

Crestline won't invest the money itself, Burns said, but will instead find hedge-fund managers whom they believe can make money for the state.

"That's their skill set, finding the right talent," Burns said.

The trustees also decided to start a search for a manager of infrastructure investments, indicating they'll likely begin investing in that area as well.

Infrastructure is another type of alternative investment that includes such things as pipelines and toll roads, where the permanent fund hasn't typically ventured.

The trustees didn't decide how much to allocate to infrastructure investments, but Burns said he expected about 2 percent of the $37 billion would be allocated to that strategy when the trustees meet again in May.

Such investments probably wouldn't begin until August or later, and returns could be a long way off.

Burns said the investments would not include the Alaska gas pipeline. While the previous administration had toyed with the idea of a permanent fund investment, Burns said he's had no indication of interest in the pipeline from the Palin administration.

"If they did, it wouldn't be us," he said.

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