Permanent Fund up in second quarter, down year-to-date
(FEB 12) The Alaska Permanent Fund returned 2.1 percent for the second quarter of the fiscal year, bringing the fiscal year-to-date return to -2.2 percent according to reports released today by the Corporation. The Fund ended December 31 with a value of $51.8 billion, down $1.0 billion from the start of the fiscal year. The return for the second quarter trailed the performance benchmark of 3.1 percent. The Fund continues to beat the fiscal year-to-date performance benchmark, which came in at -2.6 percent.
“A rally this fall helped make up some of the ground lost in the first quarter, but in the end it wasn’t enough to bring the Permanent Fund back to positive performance for the first half of the fiscal year,” said Angela Rodell, CEO. “The slowdown in the Chinese economy and drops in commodity prices, including oil, have weighed on global markets, bringing a several–year period of growth to an end.”
Mirroring the total return, the Fund’s stock portfolios were up for the quarter but down for the fiscal year-to-date. U.S. markets fared better than non-U.S. stocks, returning 5.8 percent for the quarter and -2.4 percent for the fiscal year-to-date. In comparison, non-U.S. stocks returned 2.8 percent and -10.4 percent respectively, while the Permanent Fund’s global portfolio was up 4.7 percent for the second quarter and lost -4.5 percent for the fiscal year-to-date.
The Fund’s real estate holdings helped offset the losses in the stock portfolio, returning 2.3 percent for the second quarter and 6.2 percent for the fiscal year-to-date. The private equity and infrastructure portfolios also produced positive returns. The private equity portfolio returned 0.7 percent for the second quarter and 6.2 percent for the fiscal year-to-date, while infrastructure was up 0.4 percent and 3.9 percent for the respective periods.
Falling in between the returns for stocks and real estate, bonds have had relatively flat performance so far for fiscal year 2016. U.S. bonds returned -0.5 percent for the quarter and -0.3 percent for the fiscal year-to-date, while non-U.S. bonds were up 0.3 percent and down 1.3 percent for the respective periods.
The December financial statement includes an updated projection of $47 million for the fiscal year 2016 inflation-proofing transfer that incorporates the finalized inflation rate for the period. The calculation for this transfer is outlined in Alaska statutes, and is based on an inflation rate calculated as of the end of the calendar year. Due to the present low interest rate environment, the calculation is significantly smaller than recent years, even though the principal, valued at $43.7 billion on December 31, is close to the high water mark.
The Permanent Fund recorded $737 million in statutory net income for the quarter, bringing the year-to-date total to $1.1 billion. Statutory net income is the income that is recorded to the earnings reserve, and is available for appropriation. The earning reserve ended December with a balance of $8.1 billion.
Additional information regarding the Fund’s investment performance and financial statements are available at www.apfc.org.