FAIRBANKS - The next payout of the Alaska Permanent Fund dividend is expected to shrink by 12 percent because of weaker returns, fueled in part by the Sept. 11 terrorist attacks.
Fund officials predict individual checks will be about $222 less next year, for a payout of about $1,628. The decline would be the second straight drop since 2000's record payment of $1,969.
Dividend amounts are based on an average of five years of the fund's performance. Next year's check will be based on this year combined with the last four years, said Jim Kelly, the Alaska Permanent Fund Corp. spokesman.
The comments came Wednesday at a Fairbanks meeting of the Alaska Permanent Fund Corp. board of trustees.
Although this fiscal year ends June 30, 2002, the $24.5 billion fund's performance to date has been fairly consistent with declining markets, said Robert Storer, the fund's executive director. Through Nov. 8, the fund's earnings were showing a 1.5 percent drop from last year at this time, Storer said.
Other similar large investment funds have averaged a 5.5 percent loss, he said.
Storer based the Alaska fund's better performance on the trustees' asset allocation policy, the Fairbanks Daily News-Miner reported. Currently, the fund is divided into bonds, U.S. and international stocks, and real estate.
Storer said the fund was not performing robustly before Sept. 11, and like most investment funds has taken a steep dive since. The fund has returned to pre-attack numbers, he said.
Kelly said the corporation has bought $800 million of stock in the past six weeks. The money came from selling $700 million of bonds and $100 million of real estate.
"We sold high and bought low, which is what we're supposed to do," he said.
Short term, the markets are expected to be volatile and not easily predictable by customary standards, said Michael O'Leary, of Callan Associates.
Long term, however, the bond market will give a return of 5 percent and stocks will give a return of 9 percent, O'Leary said. With 3 percent inflation, that means the real return for bonds would be 2 percent and stocks 6 percent, he said.
Kelly said the fund had been enjoying a 15 percent return a couple of years ago. But that rate has been dropping, he said, and next year the corporation expects an 8 percent return.
Most of the fund's managers - companies on contract to manage parts of the fund - did not do well, O'Leary said. The corporation's staff, which manages $9 billion of the fund, outperformed contractors, he said.
Storer said there are no plans to move more money under the corporation's management. "We have to stay the course," he said.