04/19/1994 02:47 PM Senate L&C

  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.