25/03/2010 Author: Kapila Gohel

Alaska Permanent tears down hedge fund barrier 

The board of trustees for the Alaska Permanent Fund Corporation (APFC) has changed its absolute return policy to allow the $36.5bn sovereign wealth fund to bypass so called ‘gatekeepers’ and invest directly in hedge funds.

APFC has not been investing in funds of hedge funds (FoHF), stated a spokesperson, rather it employs managers to tailor institutional mandates solely for the fund under a managed account structure.

The fund’s 6% absolute return allocation is managed by Crestline Investors, Lazard Asset Management, Mariner Investment Group and Pacific Alternative Asset Management Company (Paamco) which all manage hedge fund portfolios for the fund.

“Every [hedge fund] investment we have made so far has been through a managed account-type structure,” stated the spokesperson. “But we can now invest directly in the hedge fund managers we choose.”

While the changes were not brought about solely to save on managed account fees, the spokesperson stated, “it will be of benefit if the APFC makes an additional investment that doesn’t incur gatekeeper fees.”  

Despite being a large sovereign wealth fund, APFC still does not have the staff and the in-house expertise to make those hedge fund manager selections and is holding off going out on its own in search of hedge fund managers.
“We are more likely to make additional separate investments to hedge funds that one of our [aforementioned] managers has placed us in,” they added. As a co-investor, APFC will also have to carry out its own due diligence if it makes the additional allocations.  

APFC also has an interesting external CIO/real return programme managed by AQR Capital Management, Bridgewater Associates, Goldman Sachs Asset Management and Pacific Investment Management Company (Pimco).

“Each of these firms manages a ‘mini replica’ portfolio of the larger Permanent Fund investment portfolio, and has smaller investments across all strategies including stocks, bonds, real estate and hedge funds,” said the spokesperson.