Permafund investments up 10 percent

For the first time, fund's total value surged over $30 billion

Posted: Monday, July 25, 2005

ANCHORAGE - The Alaska Permanent Fund ended fiscal year 2005 with a healthy investment gain, but you won't see the benefits soon.

The oil-wealth savings account posted a year-end gain June 30 of 10.2 percent. That's less than the 14.2 percent gain for 2004 but still better than fund managers had expected.

In the past year, the permanent fund's total value surged over $30 billion for the first time. Today the fund value stands at just over $31 billion.

Chief executive Michael Burns said the rosy financial news won't translate to higher dividends this fall, as some Alaskans might expect.

Dividends are calculated by averaging fund results over a five-year period. Although last year was profitable, it wasn't as good as 2000, which falls out of the mix and which saw better realized earnings - or profits on investments sold.

Most of the 2005 growth was unrealized - gains on paper only, permanent fund officials said. Unrealized gains don't count in calculating dividends.

Another factor working to reduce dividends is an expected increase in qualified applicants.

Last year, each eligible Alaska man, woman and child received a dividend of $919.84. This year's dividend is expected to be slightly smaller, perhaps below $900.

The permanent fund is invested mainly in U.S. and foreign stocks and bonds as well as real estate.

Last year, real estate was the star performer with better than a 24 percent gain. Overseas bonds and stocks returned 15 percent and 10 percent respectively, while U.S. bonds and stocks each returned about 7 percent.

Burns noted that the year saw two periods of flat and downward markets but that permanent fund trustees stuck with a steady investment plan and didn't make changes based on short-term market conditions.

"This strategy has paid off," Burns said.

Almost every year since 1985, the fund has posted a gain, often in the double digits. The exceptions were 2001 and 2002, when the fund lost 3.3 percent and 2.2 percent respectively.

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