On your next visit to Alaska to attend a Yukon Quest event, take the time to ask the natives how they feel about the dividends they receive each year from the Alaska Permanent Fund (APF). There is an 84 percent chance they will tell you that no one had better touch that dividend, because that was the percentage of voters who disapproved in 1999 of any changes to dividend policy. Chances are, if the election were held today, the “no” vote would be about 99 percent. That’s why some wags have renamed it the Alaska Permanent Dividend Fund.
The APF was set up in 1976 and is funded by royalties from Alaskan natural resources, such as oil, minerals and gas. It has grown over the years into a $28 billion behemoth that attempts to earn at least five percent annual income. Over the years, the annual dividend paid out to each Alaskan (non-criminal) has varied between a low of $331 in 1984 to a high of $2,069 in 2008, but usually ranges between $600 and $1,500.
Before 2010, the funds were exclusively managed by a collection of outside fund managers known as “gatekeepers”. But in that year, the board voted to also allow direct investments into hedge funds and funds-of-funds. The current target asset allocations are as follows:
- Company exposure – 53 percent
- Special opportunities – 21 percent
- Real estate – 18 percent
- Interest rate instruments – six percent
- Cash – two percent
The fund is all about risk-adjusted return, and is emphatically not interested in investing for economic or social development. This is no “do-gooder” fund, but rather a dividend producing machine that is fiercely protected by the people of the state. If greed is good, then Alaska is a very good state.
The fund is run by the Alaska Permanent Fund Corporation (APFC), a state-owned entity that is headquartered in Juneau. The APFC also manages the Alaska Mental Health Trust Fund, a sorely needed resource in that state. The APFC’s board is made up of six members with political ties to the governor of the state, but one seat is assigned by the Commissioner of Revenue. The governor then adds a cabinet member into the mix. In this way, the people, through the duly elected governor, can control the APFC board and ensure adherence to the principles of maximum dividend payment and inflation protection. Normally, any spending done by the fund would be limited to five percent of its market value.