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My turn: Permanent fund should stay in Juneau

Posted: Thursday, May 29, 2008

A member of the Alaska Permanent Fund Corp. board is asking for a study to be proposed at the May board meeting to look into whether Juneau is the best location for the corporation.

There is no stated reason why Juneau may not be the best location, thus there has been the expected reaction of Juneau residents claiming capital creep.

First, I have to state that I strongly agree with the arguments for why the Legislature and capital should not be moved out of Juneau, as there is an inordinate effect on the relative economies and community prospects, being a small positive for Anchorage and Southcentral, but a large negative for Juneau and Southeast, already hard hit economically.

While the arguments against the capital move parallel why the corporation shouldn't move, there are additional reasons why Juneau is a great place for the corporation to remain. To comment on some initial arguments put forth for studying the move, moving the headquarters to Anchorage would not give any investment manager looking for a piece of the corporation investment allocation more reason to travel, as the corporation's close to $40 billion would have them traveling, willingly, to the end of the Aleutians if need be.

This latter statement also holds true for why there wouldn't be a significantly broader applicant pool of investment professionals who would be willing to work for the corporation if it was in Anchorage, as the experience and stature of working for the corporation attracts not only the best Alaska applicants, but strong candidates from New York, Chicago, and all other financial centers, many of whom are driven by lifestyle concerns.

The corporation should remain in Juneau for many of the same reasons that Warren Buffet, arguably the greatest long-term investor of all time, keeps his $75 billion investment firm in Omaha, Neb., and why some of the most successful investment managers reside well away from Wall Street or other financial centers. When an institution is tasked with a long-term investment horizon it is imperative that the investment decision process stay clear of the short-term, day-to-day noise that Wall Street creates.

Buffet was not swayed by all the noise and potential gains, touted even by New York city cab drivers, to invest in Internet and technology stocks during the great Internet bull market, and his investment reputation was only increased, when it was shown that the market was nothing but a bubble with enormous wealth being destroyed for those that invested at the end. It is similar today as we go through a major financial crisis caused by subprime lending and the structured investment vehicles that Wall Street was pushing on both sophisticated and unwary investors.

The corporation was unfortunately not immune, but there was no direct allocation given to these vehicles by the permanent fund. It was State Street, a firm based in Boston, but with tight ties to Wall Street, who chose to make these leveraged risky bets in their corporation-invested funds. I strongly believe that Alaska's capital, Juneau, a safe, modestly sized, sophisticated community in an incredibly beautiful natural setting with much by way of lifestyle, access and instantaneous communications to offer - Wall Street investment buzz not being one of them - is the perfect place for the corporation to make the sound long-term investment decisions required of a fund that is so important to the people of Alaska.

A final point on the effect a corporation move would have on Juneau and an indication also of what a capital move would mean; as chief investment officer of Sealaska Corp. in Juneau, I enjoy meetings with top tier investment managers on a regular basis. It is most often the case that these managers will continue on to Anchorage to see the numerous city, union and other pools of public and private money that are located up there, but I know Sealaska and other investment funds in Juneau would be seeing much less of these investment experts if the permanent fund corporation was gone.

In any event, moving the corporation would be a waste, as there are no justifiable arguments to offset the costs of a move.

• Anthony Mallott is treasurer and chief investment officer for Sealaska Corp. He lives in Juneau.



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