03/19/1998 01:50 PM House FIN

HOUSE BILL NO. 317                                                             
                                                                               
"An Act relating to investments of the Alaska                                  
Permanent Fund Corporation."                                                   
                                                                               
BYRON MALLOT, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND                        
CORPORATION (APFC), stated that HB 317 was supported by the                    
APFC Board of Trustees.  The bill would increase from 50%                      
to 60% the Board's investment authorization in common                          
stocks.                                                                        
                                                                               
He noted that virtually all the literature on capital                          
markets theory and practice indicates that equities provide                    
a vastly superior long-term rate of return compared to                         
other financial assets, albeit with increased short and                        
intermediate term volatility.                                                  
                                                                               
HB 317 would give the Board of Trustees the flexibility to                     
increase the Fund's investments in equities to a level                         
comparable to its peers.  Currently, the Permanent Fund has                    
a smaller fund allocation for equities than most other                         
larger institutional funds, including the State of Alaska's                    
retirement fund.                                                               
                                                                               
Mr. Mallott urged the Committee's support of the                               
legislation.  He provided a packet entitled: Alaska                            
Permanent Fund Corporation - The Case for HB 317.  [Copy on                    
File].                                                                         
                                                                               
Representative Mulder commented that the fiscal note does                      
not indicate the offset costs associated with the State's                      
investment.                                                                    
                                                                               
JIM KELLY, DIRECTOR OF COMMUNICATIONS, ALASKA PERMANENT                        
FUND CORPORATION, agreed, adding that for every $100                           
dollars the fund earns, it will cost $1.50 in management                       
fees.  The fiscal note covers those costs.  Representative                     
Mulder thought that APFC had been overly critical in their                     
fiscal analysis, which he felt would instead be a positive                     
impact.  Mr. Kelly reiterated that the fiscal note                             
indicates the increased management fees.                                       
                                                                               
Co-Chair Hanley agreed that the fiscal note should indicate                    
the anticipated revenue.  Co-Chair Therriault recommended                      
that an analysis provide back up information regarding the                     
anticipated revenue.                                                           
                                                                               
(Tape Change HFC 98- 70, Side 2).                                              
                                                                               
Co-Chair Hanley questioned how the percentage of                               
anticipated profit was determined.  Mr. Kelly replied that                     
the Daily Supplemental Report indicates the daily amount of                    
money the PFC has invested in the stock market.  Mr.                           
Mallott added that the data was based on the market value                      
opposed to cost value.                                                         
                                                                               
Co-Chair Therriault inquired if fund advisors anticipate                       
that it would increase to 60% right away.  Mr. Mallott                         
responded that during the annual planning process, the                         
fund's asset allocation is determined on an annual basis.                      
                                                                               
Representative Foster MOVED to report HB137 out of                             
Committee with individual recommendations and with the                         
revised fiscal note.  There being NO OBJECTION, it was so                      
ordered.                                                                       
                                                                               
HB 317 was reported out of Committee with a "do pass"                          
recommendation and with a fiscal note by the Department of                     
Revenue.