Public needs more information on Permanent Fund's Alaska investments

The governor or Legislature, or both, need to conduct an audit available to the public or engage in serious oversight of the Permanent Fund’s recent erratic decisions. There is a growing threat to the Permanent Fund, and it is coming from the trustees themselves.

Their plan included opening satellite offices to expand the fund’s national and international presence. The trustees moved ahead this summer with an Anchorage office, spending money the Legislature approved for other purposes, despite being unable to show any benefit to the fund from doing so. Rather, the fund CEO pointed out that new hires and Outside experts prefer to work remotely from home.

Further, there is a growing concern about the possibility of conflict of interest. The latest idea is the riskiest yet: Borrow vast amounts of money to invest in high-risk investments to produce a $100 billion fund in five years. This is the same scheme that caused the 1929 stock market crash.

Fortunately, fund advisers at the most recent trustees’ meeting unanimously warned against this proposal, saying such a plan was too risky in this uncertain investment climate. Moreover, it would require significant fund money to manage the loans and risky investments and to offset any potential reduction of the fund’s credit rating from making such loans for high-risk investments.

There is a need for accounting and legislative oversight of the Permanent Fund as well as the special Alaska investment portion which are under the trustees’ authority.

The fund’s net assets were valued at $73.8 billion as of Sept. 30. As a comparison, the value is down from $81.8 billion in 2021, and $76 billion in 2022. Still, the fund is managed by professional and recognized investment firms, and this professional oversight provides a performance check and balance on the decision-making process. I believe Alaskans should feel secure in their track record.

However, a few years ago, the trustees voted to take $200 million and set up a separate program for in-state Alaska investments. Most of the $200 million has been invested, but in several cases, one could question whether the intent was to invest in Alaska-domiciled resident companies rather than just have subsidiaries doing business in Alaska but headquartered Outside, as appears to be the case in several of the investments.

The Alaska investment portion has no real detailed information available, including terms of loans, interest rates, repayment and collateral — all remain confidential.

While the Permanent Fund does monthly performance reporting for their asset-class external managers, including state private-equity managers McKinley Capital Management Co. and Barings, given market confidentiality terms the Permanent Fund does not publish performance on the Alaska segment portfolio. The Alaska-intended $200 million investment is not benefited by a competitive comparison, nor is there a release to the public of the investment intended for Alaska companies.

In order for the public to have some idea of the disposition of the $200 million in funds, there would have to be a release of the performance confidentiality clause — a legislative directive to release ordered by the governor or the Legislature.

Perhaps a better solution to enhance objectivity would be for a certified public accountant to do an annual report, so that Alaskans can evaluate the condition of the special in-state investment portion of the Permanent Fund that is under the sole discretion of the trustees.

The Alaska portion of the fund should not be sheltered by a confidential mandate. These funds belong to the public, and accountability must be passed down from the governor to the trustees to all Alaskans.

Frank H. Murkowski is a former governor (2002-2006) and former U.S. senator (1980-2002) from Alaska.

 

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