New decision making parameters for Alaska’s investments

The $38.5 billion Alaska Permanent Fund Corporation (APFC) has made further enhancements to its unique approach to investment decision making, clarifying procedures relating to risk guidelines in its investment policy.

The investment policy outlines via colour codes, different operating zones which allow for various decisions to be made with, or without board approval, and correlate to the riskiness of investments.

There are three zones – green, yellow and red – with the policy outlining that the portfolio must be within the green zone at least 80 per cent of the time. The green zone is the board approved, chief investment officer operating zone.

In December the board expanded the communications and procedures for the riskier zones of yellow and red.

The amended policy clarified each required step to enter into the yellow and red zones, including the steps required to extend operating in the zones. The policy had previously been less clear about extending approval for operating in these zones and the procedures required for notifying those needed to approve it.  The updated policy has also made provisions for the board to be provided with a historical report showing periods of operating within the yellow and red zones at board meetings.

Changes to the APFC investment policy also clarified that any weighting above 20 per cent to a single portfolio manager or investment vehicle within a distressed, mezzanine or credit opportunity mandate must be approved in writing by the executive director upon recommendation of the CIO.

Previously the policy did not specify who was required to provide the written approval. The amended policy also removed the restriction on the investment life of general partnerships, increasing the partners’ ability to invest in distressed debt funds. The policy previously limited investment life to December 31, 2022.

These changes follow on from the introduction of a new way of classifying its investments in 2009 and demonstrate APFC’s continual strive to make changes to ensure the fund is well positioned to provide benefits for Alaskans now and in the future.