FUND NEWS                               Mar 02, 2007

Fund authorizes additional distressed debt investments

MARCH 2 - At a meeting this week, the APFC hired three new global managers, authorized searches for infrastructure and EAFE managers, created a transition manager pool, and authorized a commitment of up to $500 million to Crestline Investors` distressed opportunities fund.

The Alaska Permanent Fund Corporation Board of Trustees hired three new global managers, authorized searches for infrastructure and EAFE managers, and created a transition manager pool during a two-day meeting that ended Thursday. In addition, the Board authorized a commitment of up to $500 million to Crestline Investors’ distressed opportunities fund.

"Distressed opportunity periods are cyclical in nature, and some are predicting that a new wave may be on the horizon," said Michael Burns, Chief Executive Officer. "The Board believes that by making a specific commitment to a fund of distressed investment specialists now, the APFC will be prepared to take advantage of opportunities that may appear."

Distressed investments arise when companies are in trouble, and can bring increased returns with some corresponding risk. The Fund currently has exposure to distressed investments of approximately $50 million in private equity and $150 million in the absolute return portfolio. Like private equity, the allocation would only be invested as opportunities arise and would remain invested in bonds in the interim. Crestline was the first absolute return manager hired by the APFC in 2004, and they currently manage $581 million in the Fund’s absolute return strategies portfolio.

On Wednesday, JP Morgan made a presentation on infrastructure investments, revisiting the topic first covered last spring by Callan Associates and Pace Global Energy Services. Infrastructure investments include a range of projects traditionally built and operated with public funds, such as roads, water or power utilities, and communications networks. They have the qualities of low correlation to other assets, stable returns, long duration and inflation-protection. Following the presentation, the Board approved a search for one or more global infrastructure managers, but did not make a final decision regarding an allocation to infrastructure.

The Board hired three new managers on Thursday to complete the 14% allocation to global stocks created last September. AllianceBernstein, L.P., GMO LLC and AQR Capital Management, LLC, were each given a $500 million allocation. Four Fund managers were assigned to the global allocation last fall: two existing global managers, and two Fund managers that were authorized to expand to global mandates. The new global allocation was funded from rebalancing portions of the Fund`s US and non-US allocations, and did not change the total 53% allocation to public stocks nor require the termination of any managers.

The Board also authorized a search for new EAFE (Europe, Asia, Far East) managers and the creation of a transition manager pool. When large sums of money move between managers (due to manager entry, exit, re-allocation of assets, paying the dividend, etc.) there may be a role for a transition manager to more efficiently accomplish the feat. Callan Associates pre-screened a group of transition managers with experience in a variety of asset classes and mandates who can assume a fiduciary role as needed, and the Board authorized staff to engage these managers as appropriate. The managers are Barclays Global Inv. (BGI), BlackRock/Merrill Lynch, Credit Suisse, Frank Russell - Russell Investment Group, Mellon Transition Management Services, and State Street Bank.

The Board’s next scheduled meeting is May 30 and 31 in Anchorage.