United States of America
The Alaska Permanent Fund was created by the people of Alaska in 1976 as a way to save a portion of the state’s oil revenues for the needs of future generations. It uses oil royalties to make investments in bonds, stocks, real estate, infrastructure, and private entities. The returns on these investments are used to grow and finance the Fund. Additionally, since 1983, the Alaska Permanent Fund Dividend Division has distributed a portion of the earnings to Alaskans annually in the form of a dividend. The Fund is currently worth more than $54 billion.
In 1980, the Alaska State Legislature created the Alaska Permanent Fund Corporation to manage the investments of the Permanent Fund outside of the State Treasury. The investments are guided by a six-member board of trustees, appointed by the Governor, but once appointed the four public board members can only be removed for cause.
The Trustees have maintained a conservative asset mix over the years. The current asset allocation consists of 6 asset classes categorized by the following Investment Objectives and Liquidity Characteristics:
- Tradeable Growth – (1) Public Equities
- Tradeable Income – (2) Bonds, Real Estate Investment Trusts, Infrastructure Securities
- Illiquid Growth – (3) Private Equity and Special Growth, (4) Absolute Return Funds
- Illiquid Income – (5) Real Estate, (6) Infrastructure and Special Income
Target allocation ranges and return criteria, including benchmarks were established for each of these asset classes. Investments into each of the six asset classes is led by a dedicated investment team whose performance benchmarks are tailored to achieve best-in-class investment performance.
The Permanent Fund is divided into two parts: Principal (non-spendable) and Earnings Reserve (spendable), both of which are fully invested in the same pool of assets. The Alaska Constitution articulates that the Principal shall only be used for income-producing investments. The Earnings Reserve account, established in Alaska Statutes, may be spent through appropriations approved by the Legislature.
In a state with primarily non-renewable resources, the Permanent Fund generates renewable revenue. In most years since its creation, the Fund has been the second-largest producer of state revenue, trailing only taxes and royalty payments generated by the oil and gas industry. The Permanent Fund is a progressive concept that provides a source of renewable revenue for Alaska; when oil and gas revenues are diminishing, the Fund is still growing. The Fund’s successful adaptation to the varied global economic climates fortifies its significance to the State’s future.
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United States of America