Alaska Permanent Fund’s private equity portfolio has regained lost ground in the second quarter, thanks in part to a rebound in public stocks.

Although the private equity portfolio lost nearly 5.26% of its value in the first quarter, its subsequent performance has been particularly strong, chief investment officer Marcus Frampton told the trustees at the board meeting on 23 September.

Performance has significantly improved since 31 March, with around 75% of the private equity funds in the Alaskan investor’s portfolio having reported second-quarter results as of late August, according to documents presented at the meeting. The portfolio is positioned to deliver a return in the midteen percentages for the second quarter with an associated gain of more than $1bn, the documents show.

The second-quarter rebound would be included in the Permanent Fund’s 30 September performance numbers, Frampton told the board. Private equity returns are reported with a single-quarter lag.

The fund’s portfolio got a lift from the public market recovery. The 20 largest public stockholdings in the private equity portfolio generated incremental gains of around $750m between 30 June and late August, more than offsetting first-quarter losses, according to the documents.

Institutional investors often wind up with some public stocks in their private equity portfolios, typically the result of shares in companies that private equity firms have taken public but haven’t yet sold, or direct purchases of public company shares. Shares of public companies Alaska Permanent Fund owns include healthcare companies Denali Therapeutics and Vir Biotechnology.

Private equity has been a top performer for the sovereign fund. As of 30 June, the asset class returned 1.94% over one year, 17.16% over three years and 12.74% over five years, according to the meeting documents.

Strong returns have prompted the fund to steadily boost its target allocation to the asset class from 3% of its total fund in 2013 to a 15% target for fiscal 2021. The sovereign fund plans to reach a 19% long-term target allocation to the asset class by 30 June 2024. Private equity and special opportunities represented 14.4% of the Permanent Fund’s portfolio as of 30 June, documents said.

Alaska has allocated $1.6bn for commitments and investments to private equity and special opportunities in the fiscal year ending 30 June 2021, roughly in line with the amount it has deployed to such investments in the previous fiscal year, according to the documents.

Source: Wall Street Journal

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