Legislature(2021 - 2022)SENATE FINANCE 532
01/26/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Permanent Fund Corporation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 26, 2022
9:02 a.m.
9:02:51 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Valerie Mertz, Acting Executive Director and Chief
Financial Officer, Alaska Permanent Fund Corporation.
PRESENT VIA TELECONFERENCE
Marcus Frampton, Chief Investment Officer, Alaska Permanent
Fund Corporation.
SUMMARY
PRESENTATION: ALASKA PERMANENT FUND CORPORATION
9:03:21 AM
Co-Chair Stedman reminded that the Permanent Fund was one
of the state's number one assets.
^PRESENTATION: ALASKA PERMANENT FUND CORPORATION
9:04:19 AM
VALERIE MERTZ, ACTING EXECUTIVE DIRECTOR AND CHIEF
FINANCIAL OFFICER, ALASKA PERMANENT FUND CORPORATION,
introduced herself and discussed her background. She shared
she was certified in the mid-1990s as a Certified Public
Accountant.
Ms. Mertz assured the committee that there was good work
going on at APFC.
9:06:13 AM
Ms. Mertz discussed a presentation, "APFC - Alaska
Permanent Fund Corporation, Senate Finance Committee,
January 26, 2022" (copy on file). She looked at slide 2,
"APFC Alaska Permanent Fund Corporation, Established 1980":
Fiduciary Duty
APFC operates as a separate state entity under the
oversight of an independent Board of Trustees who
serve as fiduciaries of the Alaska Permanent Fund
Mission
To manage and invest the assets of the permanent fund
and other funds designated by law in accordance with
AS 37.13.010-37.13.190.
Vision
To deliver outstanding returns for the benefit of all
current and future generations of Alaskans.
Alaska Permanent Fund
Principal
Constitution and AS 37.13.010
Earnings Reserve Account
AS 37.13.145 (a)
Amerada Hess Settlement
AS 37.13.145 (d)
AK Capital Income Fund AS 37.05.565
Alaska Mental Health Trust Fund
AS 37.13.300
Alaska Mental Health Trust Authority
9:07:07 AM
Ms. Mertz spoke to slide 3, " Fund Value: $80,984,300,000 -
Unaudited as of November 30, 2021," which showed two bars
depicting the funds in the principal and the Earnings
Reserve Account (ERA). She noted that APFC put the
presentation together at the same time as December 2021
numbers were being finalized. She pointed out that at the
end of November the fund principal held $51.1 billion in
royalty deposits and other appropriations and $14.2 billion
in unrealized gains. The Earnings Reserve Account (ERA)
held $8.9 billion in uncommitted realized earnings, $3.4
billion in POMV commitment for FY23, and $3.4 billion in
unrealized gains. Unrealized gains and losses on invested
assets were held until an investment was sold, then the net
realized earnings flowed to the ERA.
9:08:32 AM
Ms. Mertz referenced slide 4, "Sources of Change in Value -
FY 21 End to FY 22 as of November 30, 2021," which showed a
table depicting how the fund had changed in value since the
end of the fiscal year. She said that at the end of FY21
the fund had a value of $81.9 billion and just under $2
billion in net investment revenue had been added since.
Co-Chair Stedman suggested that the pace of the
presentation increase.
9:09:20 AM
Ms. Mertz turned to slide 5, "APFC Return on Investment,"
which showed a table with graphics showing a comparison of
metrics from FY 20 to FY 21.
9:09:51 AM
Ms. Mertz considered slide 6, " A Renewable Resource",
which showed a graphical representation of the fund
structure that made up the Permanent Fund:
Historically, the Permanent Fund was used as a savings
device to generate revenues and pay dividends.
Today, the Fund is used as a savings device to
generate revenues for the General Fund through the
POMV Draw to support statewide services and programs,
including the dividend.
9:10:21 AM
Ms. Mertz displayed slide 7, " Principal."
Ms. Mertz highlighted slide 8, "Principal":
Grows through-
Royalty Deposits AS 37.13.010 (a)(1) and (a)(2)The
constitutionally minimum required 25% of royalty
proceeds and the statutorily mandated deposits of 50%
for leases after 1979.
Inflation Proofing AS 37.13.145 (c)The inflation
proofing calculation is based on deposits into the
Principal and the inflation rate calculated per
statute. An appropriation is needed to fulfill this
statutory obligation.
Special Appropriations AS 37.13.010 (a)(3)
Legislative Deposits from both the General Fund and
the ERA.
Constitutionally Established
.notdefPermanent Savings
.notdefUsed only for income-producing investments
.notdefNot available for appropriation
Ms. Mertz pointed out the table on the right-hand side that
showed the history of inflation transfer and royalty
deposits by fiscal year 2009 through 2022.
9:11:02 AM
Senator Wilson asked why Ms. Mertz expected a large
increase in royalties in FY22
Ms. Mertz stated that the number on the table was provided
by DOR as part of the revenue forecast.
Co-Chair Stedman interjected that the number was contingent
on the price of oil.
9:11:38 AM
Senator Wielechowski clarified that the money that the
state transferred in the previous years was designated as
inflation proofing and wondered why it was not reflected on
the slide.
Ms. Mertz relayed that for reporting purposes the transfers
were classified as special appropriations.
Senator Wielechowski emphasized that the legislature had
specifically designated $9 billion over the last two years
for inflation proofing.
Co-Chair Stedman thought there was some confusion. He noted
two appropriations, one for $4.9 billion that was specified
toward inflation proofing, and another for $4 billion that
had not had the specific language attached. He said the
fund should be inflation proofed first and then
contributions should be made to the principal to protect
and grow the fund. He stressed clarity in appropriation
language.
9:13:55 AM
Ms. Mertz looked at slide 9, " Principal Contributions,"
which showed a bar graph that illustrated contributions to
the principal of the fund since inception. She said that
the gold bars represented mineral royalties, the bring blue
bars were inflation proofing, and the royal blue bars were
transfers from the ERA to the principal. She said that
since inception $18.4 billion of royalty deposits, $18.0
billion in inflation proofing, and $15.0 billion in special
appropriations had been deposited into the fund.
Co-Chair Stedman noted that FY10 showed negative inflation.
He queried the numeric relative to the $8 billion added in
2022 for FY16, FY17, FY18 and FY21.
Ms. Mertz relayed that the total of the five years that
there had not been an appropriation specifically for
inflation proofing, estimating for FY22, was $4.4 billion.
Co-Chair Stedman thought it would be nice if there was a
footnote to indicate the legislative intent of the nearly
$9 billion appropriated for inflation proofing.
9:16:29 AM
Ms. Mertz showed slide 10, " Earnings Reserve Account."
Ms. Mertz advanced to slide 11, " Earnings Reserve
Account":
.notdefEstablished in AS 37.13.145 (a) as a separate account
to hold the realized earnings from the Fund's
investment portfolio
.notdefInvested under the same asset allocation as the
Principal
.notdefIs available for appropriation
.notdefGrows through the receipt of statutory net income
9:16:47 AM
Ms. Mertz looked at slide 12, "Statutory Net Income":
AS 37.13.140 (a) directs the net investment earnings
of the Fund to the ERA excluding unrealized gains &
losses.
Statutory Net Income is the direct result of
investment activity:
Monthly cash inflows from stock dividends, bond
interest, and real estate
Realized Capital Gains/Losses: The net income
generated by the sale of investments. (i.e., realized
gains minus realized losses)
FY21 as of June 30, 2021
SNI = $7,962,400,000
FY 22 as of November 30, 2021
SNI = $2,993,600,000
Ms. Mertz noted that the bars on the chart represented the
statutory net income, and the gold line was the total
return for the fund. She noted there was not necessarily a
correlation between the total return to the fund and the
statutory net income flowing into the ERA. She reiterated
that FY21 was an extraordinary earning year.
Co-Chair Stedman asked whether the FY21 numbers could be
attributed to real estate liquidation or portfolio
rebalancing.
Ms. Mertz stated that the FY21 SNI was largely related to
gains realized in the public equity portfolio.
Co-Chair Stedman asked about real estate.
Ms. Mertz noted that gains in FY 18 was related to real
estate and realization in the private equity portfolio.
Co-Chair Stedman recognized that Senator von Imhof had
joined the meeting.
9:19:06 AM
Ms. Mertz showed slide 13, "Use of Fund Earnings - as of
November 30, 2021":
Paid out of ERA = $36.9 B
.notdefDividend Appropriations $24.4 B l 30.7 percent
.notdefPOMV Distributions to General Fund $12.6 B l 15.8
percent
.notdefAlaska Capital Income Amerada Hess $0.4 B l 1.0
percent
Savings from ERA to Principal = $30.3 B
.notdefInflation Proofing $18.0 l 22.6 percent
.notdefSpecial Appropriations $12.3 l 15.5 percent
Current Realized Earnings Balance = $12.3 B
.notdefFY23 POMV commitment $3.4 B l 4.2 percent
.notdefUncommitted Earnings $8.9 B l 11.2 percent
Total Realized Earning = $79,561,200,000
Paid out of ERA $36.9 billion
Savings to Principal $30.3 billion
Current Balance $12.3 billion
9:19:42 AM
Senator von Imhof recalled that the statute was set up so
that in any given year money could be paid to the dividend
and to the ERA, to be spent by the legislature. She noted
that the legislature had chosen not to spend out of the ERA
until the POMV legislation in 2019.
Ms. Mertz asked Senator von Imhof to restate the question.
Senator von Imhof noted that SNI had been available for
expending by the legislature since the inception of the
fund. She asked whether the legislature had ever chosen to
spend out of the ERA, before POMV in 2019.
Ms. Mertz replied in the negative.
Senator von Imhof asked whether there would be nearly $80
billion in total realized earnings if the legislature had
chosen to spend from the ERA prior to POMV in 2019.
Ms. Mertz acknowledged that the fund would have been
smaller and would have generated less realized earnings.
Senator von Imhof asked whether Ms. Mertz had ever done a
thought experiment on what the fund would look like if the
legislature had chosen to spend from the ERA pre-2019.
Ms. Mertz stated that APFC had not done the analysis and
was reluctant to do a backward-looking analysis.
Senator von Imhof noted that Callan had mentioned compound
interest. She wanted to make the point that there was a
tremendous amount of realized earnings in large part due to
the legislature not exercising its right to take any funds
from the account. She thought Callan had conveyed that
keeping as much money in the fund as possible, for as long
as possible, would grow the fund in the largest way.
9:23:05 AM
Co-Chair Stedman remarked that historically the state never
took their portion of the fund earnings, but rather
reinvested it into the fund.
9:24:53 AM
Co-Chair Bishop referenced an earlier slide that alluded to
the fund as a renewable resource. He asserted that it was
the legislature's goal to ensure that the fund remained a
renewable resource.
9:25:54 AM
MARCUS FRAMPTON, CHIEF INVESTMENT OFFICER, ALASKA PERMANENT
FUND CORPORATION (via teleconference), introduced himself
and
Mr. Frampton displayed slide 14, "Investment Management."
Mr. Frampton turned to slide 15, "Investment Oversight":
Board of Trustees
As Fiduciaries of the Fund, Full Authority to Make
Investment and Management Decisions.
Provide Authority to Invest Within Set Bands
Approve Target Asset Allocation
Adopt Investment Policy
Executive Director
Assures Strategies Adopted by the Board are
Successfully Implemented.
Chief Investment Officer
Makes Strategic and Tactical Allocations to Allow the
Fund to Grow in Value.
Portfolio Managers
Responsible for the Investment and Performance of Each
Asset Class
9:28:35 AM
Mr. Frampton considered slide 16, "Investment Department":
Current Topics
?Performance
?Current Portfolio Positioning
?Personnel, open positions, and recruiting
?Assessment of Internal vs External Management
?Asset Allocation
?Market Environment
Mr. Frampton noted that the most recent performance numbers
were for December 2021. He shared that January had seen a
decline in the market that would be addressed in a future
slide. He stated that there were currently 3 open
positions. He relayed that the labor market was tight but
was no need for concern.
9:32:25 AM
Senator Wielechowski asked whether there were full-time
APFC employees that lived outside the state.
Mr. Frampton replied that 3 investment department employees
worked remotely from different areas of the country. He
said that there could be 1 or 2 others in other
departments.
Senator Wielechowski asked whether employing out of state
was a new policy. He asked whether the state paid for the
employees to travel to Alaska.
Mr. Frampton affirmed that the policy was new. The
employees were required to return every quarter, which was
paid for by APCF.
9:34:04 AM
Co-Chair Stedman asked Ms. Mertz to get back to the
committee with detailed information on the out of state
employees.
9:34:36 AM
Co-Chair Bishop asked whether APFC was competitive with
wages amongst its peers.
Mr. Frampton explained that there was a wide range of
compensation for similar corporations. He discussed pension
plans for other organizations. He believed that
compensation was below average of competitors.
9:36:17 AM
Senator von Imhof built on Senator Wielechowski's question
about remote working and paying for employees to travel for
work. She discussed the various circumstances where
investment managers would travel. She thought that having
an investment manager in New York was beneficial to the
corporation.
Co-Chair Stedman reiterated his desire for further detail
on the work and cost of out of state employees.
9:37:56 AM
Senator Wilson asked whether the increase in funding for
staff and benefits in the FY23 budget would help to
increase staff retention.
Mr. Frampton thought such increases were usually helpful
and appreciated.
9:38:52 AM
Mr. Frampton skipped over slide 17, "A Portfolio of 8 Asset
Classes."
Mr. Frampton highlighted slide 18, "Asset Allocation,"
which showed a series of pie charts depicting asset
allocation in different years, including the target
allocation for 2022. He noted that the slide was a
graphical depiction of the asset classes that were listed
on slide 17.
Mr. Frampton continued to address the asset allocations
listed on slide 18. He noted that the investment climate
had changed significantly since 1980. He noted that private
equity was the one asset class that was a key return
driver. The asset allocations included bonus, sticks, real
estate, private equity, absolute return, private income,
risk parity, and cash.
9:41:30 AM
Senator Hoffman asked whether Mr. Frampton had a similar
chart where showing asset allocations were invested
globally. He asked when the authority had been granted by
the legislature.
Co-Chair Stedman asked Mr. Frampton to include information
in his answer to address large international companies and
U.S. companies with international exposure.
Mr. Frampton recalled that during his tenure, APFC's equity
benchmark had been the All-Country World Index, which
included half U.S. stocks, 40 percent internationally
developed, and 10 percent emerging markets. He recalled
that APFC had added international stocks at least 20 years
previously, and perhaps longer. He believed that the stocks
list was expanded to include alternative stocks. He thought
the list of available investments had been expanded in the
early 2000s.
9:44:19 AM
Co-Chair Stedman asked how Mr. Frampton accounted for U.S.
stocks that were diversified across the world.
Mr. Frampton agreed that globalization of U.S. companies
had been an expanding trend. He summarized that the big
U.S. stocks were global companies.
9:45:11 AM
Co-Chair Bishop asked whether any of APFC's asset
allocations include exchange-traded gold funds.
Mr. Frampton answered in the affirmative.
9:46:31 AM
Mr. Frampton looked at slide 19, "Total Fund Positioning
and Performance," which showed three bar graphs depicting
recent fund performance. He made note of the success of
private equity in 2021. He discussed the numbers as
defensive positioning and the desire to offset the
overweight private equity with an underweight public
equity. He spoke of the day-to-day fluctuation of the
market. He said public equities were performing well at the
moment.
Co-Chair Stedman commented that the committee paid more
attention to the longer term than what was happening any
given day of the week. He did not want to get bogged down
in the day to day of the federal reserve.
9:49:59 AM
Mr. Frampton advanced to slide 22, "Current Market
Environment," which showed a bar graph and a line graph.
The bar graph on the left showed the U.S. 60/40 portfolio
10-year annualized returns over cash. The line graph on the
right illustrated the U.S.A subsequent 10-year equity
return, and the U.S.A. expected equity return. According to
Bridgewater Associates, using a valuation-based expected
return approach, the 10-year outlook for nominal returns on
U.S. equities was 5 percent.
Co-Chair Stedman thought it was clear that the returns
would be in the 5 to 6 percent range moving forward.
9:52:01 AM
Senator von Imhof asked about volatility and whether there
was any prediction of any big highs or big lows or was the
outlook steady give or take a percentage point.
Mr. Frampton expected volatility. He said that markets did
not typically move in a straight line.
Senator von Imhof thought that the expected volatility
indicated that the ERA would fluctuate. She commented that
the five-year lookback of the value of the fund provided
more stability for the POMV.
Co-Chair Stedman considered that the idea should be
discussed further.
9:54:19 AM
Mr. Frampton spoke to slide 23, "Current Market
Environment," which showed Callen's projections of the
equity markets going forward.
9:54:56 AM
Mr. Frampton referenced slide 24, "Risk Management":
APFC is in the business of taking risks. APFC has to
take risks in order to achieve its return objectives.
The goal of risk management is not to avoid risks, it
is to:
• know and understand the risks taken,
• measure, monitor and report these risks, and
• Manage risks to acceptable levels, and review
whether returns are commensurate
Risk appetite is a broad based articulation of the
Corporation's thresholds, in terms of risks it is
willing to take, in pursuit of its objectives. Risk
Appetite is defined in terms of a reference portfolio
- 'Risk Tolerance Portfolio' (RTP).
The key measures of risk include: Value at Risk (VaR),
Tracking Error (TE), Liquidity, Concentrations, Tail
Risk & Stress Analysis
Mr. Frampton thought the committee was probably aware of
the inverse relationship between risk and time horizon. He
stressed that risk was important to earn returns.
9:56:42 AM
Senator Wielechowski asked whether Mr. Frampton could
discuss the chain of command at APFC. He understood that
Callan made recommendations, after which the board set the
general asset allocation, and then the investment officers
handled the day-to-day investments, which could be
overturned by the chief executive officer.
Mr. Frampton stated Senator Wielechowski was "broadly
correct." He said that he reported to the executive
director and that Senator Wielechowskis characterization
of the asset allocation and how policies were set was
correct. He thought before his tenure there had been a lack
of clarity between the chief executive officer and the
executive director concerning investment decision making.
He said that what changed when he came into his position
was the formalization of the investment committee, which
made all the investment decisions. He shared that any
disagreements on investment decision between the committee
and the executive director were brought before the board.
9:59:05 AM
Senator Wielechowski asked whether board members ever came
to people in the investment committee with investment
proposals.
Mr. Frampton stated that the scenario described by Senator
Wielechowski had never occurred.
Senator Wielechowski understood that the prior CEO never
overturned decisions made on a day-to-day basis.
Mr. Frampton agreed.
10:00:03 AM
Senator von Imhof commended the establishing of the
investment committee. She thought that the system provided
for meaningful checks and balances. She asked whose idea it
had been to create the Alaska Investment Program with
McKinley Capital Management LLC and Barings LLC.
Mr. Frampton explained that the program was created with
direction from the board. He furthered that the execution
of the program, the hiring of the two LLCs, was done at the
staff level.
Senator von Imhof confirmed that the policy for investments
were at the board level, and the decisions were as granular
as which state, or which fund, or sector oriented.
Mr. Frampton replied that in the regular private equity
program there was an asset allocation target and once a
year the staff reviewed with the board how much would be
invested in private equity, without discussion of specific
types of managers or geography. He explained that the
Alaska Investment Program was unique because there had been
a board resolution directing staff to form a new investment
program.
10:02:55 AM
Senator Wilson added to Senator von Imhof's question. He
asked whether the committee could get an update on the $200
million that had been invested by the Alaska Investment
Program through McKinley Capital Management LLC.
Co-Chair Stedman had previously asked Ms. Mertz to prepare
a response document pertaining to the question.
Ms. Mertz relayed that APFC disclosed certain information
about the in-state program in the monthly performance
report, such as performance information and current market
values for the program. She specified that the
confidentiality requirements in the agreements precluded
disclosing more detailed information, as well as statutory
restraints meant to protect confidentiality. She emphasized
that APFC was aware of the sensitivity surrounding the
issue and the need for information by the legislature and
other parties.
Co-Chair Stedman encouraged the two firms to disclose as
much information as possible.
10:06:02 AM
Senator Wielechowski asked whether Ms. Mertz thought the
in-state investment program was a good idea, or whether the
drawbacks outweighed the benefits.
Ms. Mertz was not comfortable giving her opinion on the
matter. She thought the program was created in a way that
allowed staff to be independent of investment decisions.
She believed that the board resolution directing the
program was designed to support the statute in place that
encouraged the corporation to invest in Alaska.
Co-Chair Stedman asked Ms. Mertz to follow up with
additional information.
10:08:01 AM
Senator Wielechowski understood that the board had
recommended up to 5 percent allocation to in-state
investments, to $4 billion. He queried the thinking on that
practice from an investment perspective.
Co-Chair Stedman asked Mr. Frampton to address the question
and asked for the question to be added to the list of
formal written responses to the committee.
Mr. Frampton stated that one of the goals of the investment
policy was to prioritize Alaskan investments. He noted that
there were many qualitative things that went into
investments. He thought there were good investment
opportunities in the state but that they were limited. He
addressed the target of 5 percent mentioned by Senator
Wielechowski and stated that it had no compliant teeth to
it, and he considered the target to be aspirational.
10:10:57 AM
Co-Chair Stedman reiterated that he wanted more information
provided in written response. He referenced committee
discussion a few years previously that Alaska was so small
that the absorption rate could be high. He noted that a
presentation was forthcoming on the matter and the fact
that the Permanent Fund was the largest in the world when
considering the states population.
10:12:04 AM
Senator Hoffman asked how management fees for the Alaska
portion of the portfolio compare to other fund managers
outside Alaska.
Mr. Frampton stated that the in-state fees were industry
standard.
Co-Chair Stedman requested more detail.
Mr. Frampton stated there was a management fee, as well as
an incentive fee over a hurdle; an equity-like rate of
return needed to be earned before incentive fees were
provided. There was a base fee on the assets that were
committed.
10:13:11 AM
Senator Wielechowski asked whether Callan had an opinion on
the Alaska Investment Program. He asked whether the Alaska
investment program complied with the Prudent Investor Rule.
Mr. Frampton shared that he had spoken with Callen about
the in-state program. He said that from an asset allocation
standpoint the program was within the private equity
allocation. He thought that Callan would consider that the
program was well designed.
Senator Wielechowski reiterated the question relating to
the programs compliance to the Prudent Investor Rule.
Mr. Frampton replied in the affirmative.
Ms. Mertz answered in the affirmative.
Co-Chair Stedman asked for Ms. Mertz to include any
information pertaining to discussions on the matter between
Callan and the board.
Senator Wielechowski asked whether APFC was subject to the
Federal Trade Commission (FTC) oversight for insider
trading activity.
Mr. Frampton answered in the affirmative. He said that APFC
did not get annual exams for FTC or have a regulatory
relationship with FTC.
Co-Chair Stedman asked Ms. Mertz to address front-running
and insider trading in her written response to the
committee.
10:17:59 AM
Senator von Imhof asked for APFC to provide the resolution
from 2018 that established the Alaska Investment Program.
She asked for any meeting minutes on the ensuing
discussion.
Co-Chair Stedman asked Mr. Frampton to summarize the
remaining slides.
10:19:07 AM
Ms. Mertz advanced to slide 31, "Distribution Calculations
-subject to appropriation," which showed two tables and a
bar graph. She discussed the Statutory Dividend Fund
Transfer Calculation and POMV Calculation reflected on the
slide.
10:20:07 AM
Ms. Mertz showed slide 32, "Return & POMV Draw":
.notdef POMV Draw AS 37.13.140 (b) Average
market value of the Fund for the first five
of the preceding six fiscal years
.notdef 5.25% FY19-FY21/ 5.0% FY22
.notdef Based on market value, rather than
realized income
.notdef Subject to annual appropriation
.notdef Predictable Stable
Ms. Mertz highlighted that because of the timing lag in the
calculation, the effective rate of the POMV draw could be
calculated well in advance of the budget process. She noted
that the blue and green lines on the chart showed the total
return of the fund.
10:21:20 AM
Ms. Mertz turned to slide 33, "Resolutions":
00-13, 03-05, 04-09: Constitutionalize Annual Fund
Draw. Limit the annual Fund payout to not more than
a 5% POMV averaged over a period of 5 years. Assures
permanent inflation proofing.
17-01: Identify and pursue legislation or legislative
support for some form of inflation-proofing that will
preserve the purchasing power of the principal of the
permanent fund for all generations.
18-01: Supporting a Rules Based Legal Framework to
govern Fund inflows, outflows, and internal transfers.
A holistic framework rationalized by policymakers
regarding the rules for savings, withdrawals, and
growing the real value of the Fund results in a
consistent approach to transfers and sustainability of
the Fund over the long-term.
18-04: Affirming the importance of formulaic
management of transfers into and out of the ERA to
ensure sustainability and long-term growth of the
Fund, by identifying four key principles: Adherence to
Rules, Ensuring Sustainability, Automatic Inflation
Proofing, Promoting Real Growth.
20-01: Additional measures to enhance the sustainable
use of the Fund include restructuring the Fund from
its' current two account system into a single Fund as
well as periodic review of Fund Return
Assumption and ERA Balance Buffer (4X Buffer).
10:22:13 AM
Ms. Mertz showed slide 34, "Trustees' Paper Volume 9":
Successful SWFs operate within a rules-based system
that allows them to perform a combination of saving,
stabilization, and income-generation functions.
This paper proposes a number of reforms that will
strengthen the stability and sustainability of
Alaska's Permanent Fund:
LESSON #1: MISSION CLARITY
LESSON #2: THE IMPORTANCE OF RULES
LESSON #3: SUCCESSFUL ENFORCEMENT OF SAVING RULES
LESSON #4: DESIGNING A POMV SPENDING RULE
LESSON #5: REFORMING THE ERA
https://apfc.org/report-archive/#14-33-trustees-papers
Ms. Mertz explained that the paper compared the structure
of the Permanent Fund to other sovereign wealth funds
around the world. She relayed that that the paper covered
successes and failures, the importance of mission clarity
and a rules-based framework, and an effective construct for
the POMV draw.
Ms. Mertz showed slide 36, "www.apfc.org," which showed a
graphic of APFC's website. She commented that she would
provide all the information requested by the committee.
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
10:24:50 AM
The meeting was adjourned at 10:24 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012622 APFC Senate Finance Committee.pdf |
SFIN 1/26/2022 9:00:00 AM |
APFC |
| 202202_APFC Follow Up to SFIN on Jan 26_with Attachments.pdf |
SFIN 1/26/2022 9:00:00 AM |