Legislature(1993 - 1994)
04/19/1994 02:47 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CHAIRMAN KELLY called the Senate Labor and Commerce Committee meeting to order at 2:47 p.m. and announced SB 244 (PERMANENT FUND D INVESTMENTS - LTD PARTNERS) to be up for consideration. DAVID GOTTSTEIN, President, Dynamic Research Group, said he does research on the stock market and he supported SB 244. He felt it is critical in the evolutionary process of the Permanent Fund to, as part of their investment arsenal, be able to invest in "alternative investments," because over time, this is the logical next step to keep up with competitors with capital flow. ED RASMUSSEN, Chairman, Board of The National Bank of Alaska, supported SB 244. He said he didn't know of a fund in America that doesn't have some sort of authority for alternative investments. Without it, our ability to compete in the international markets is hamstrung. SENATOR SALO asked what "alternative investments" means. MR. GOTTSTEIN said that it means the ability to enter an investment class that is not restricted. It's important to include these types of investments or we won't be able to get the incremental returns that we need. CARL BRADY, Anchorage, said that alternative investment is a strategy. SENATOR SHARP said the original bill had mentioned not having an aggregate of over 5% of the total PF being in alternative investments. He asked someone to explain "ownership in a collective investment vehicle." MR. BRADY explained that the vehicle would be an institutional investor in a fund or pool with other investors. It could be a partnership or any number of things; it's investing with other investors. SENATOR SHARP asked if they were looking at a mutual fund for the big boys. MR. RASMUSSEN said it is not a mutual fund concept. It is co-investing based on recommendations of the institutional management. Number 214 SENATOR LINCOLN asked if they wouldn't meet more regularly than once a year to review the policies and investments. MR. BRADY answered that they would meet more, but once is the minimum. SENATOR LINCOLN thought the wording should be amended to say "at a minimum" before "annually." SENATOR LINCOLN asked why there was such a major rewrite of the original bill. JIM KELLY, Research and Liaison Officer, Permanent Fund Corp., explained the reason for the changes was there was a lot of confusion when it was first introduced because of the way it was written and the CS accomplishes the same thing in either case. SENATOR LINCOLN asked what the gate keeper fee is. MR. KELLY explained that it was an outside disinterested third party hired to give them expert advise on purchases. SENATOR RIEGER asked if there were any particular investments the Permanent Fund had in mind. MR. BRADY said they were a long ways away from any specific investment although they have received testimony from several advisors. Number 330 SENATOR RIEGER suggested amending page 1, line 7 to add "nonrecourse" in front of "partnership" and "collective investment vehicle"; on page 2, line 1 delete "oil and gas"; on page 2, line 3 insert "at least" in front of "annually"; and delete the letter (l). MR. BRADY said it wouldn't make any difference to him to have "at least" in front of "annually", but he couldn't speak for the Board. He had no problem with deleting "oil and gas". He didn't have a problem with inserting "nonrecourse." SENATOR KELLY said he didn't necessarily concur with deleting "oil and gas" since he thought there was some public policy reason for it. MR. BRADY said the reason they put in reference to oil and gas operations was simply to stop a fear that they would be purchasing stock of a corporation that has substantial oil and gas operations in Alaska, or substantial income. The reason being if the price of oil would go down, presumably the price of the stock would go down and the state's revenue stream would go down as well. That would be like a double whammy. The Permanent Fund owns some of Arco and Exxon besides. SENATOR LINCOLN said she had problems with deleting "oil and gas" also. SENATOR KELLY said they would continue to work on this bill and bring it back before committee.