REAL ESTATE - The Alaska Permanent Fund(APF) will be making a formal allocation in the near future to infrastructure investments.
The outcome at a recent fund board meeting was not to make a formal allocation at this time, though the move will be happening soon.
Dave Stuart, manager of the fund’s real estate investments, said, "It would be my guess that a set allocation for infrastructure would be made at our meeting at the end of May."
The allocation being discussed is 2% of the pension fund’s $37.1bn (€28.3bn) of total assets. This would mean there would be $750m of capital available to invest in infrastructure.
The first move in this area will be a search for one or more global infrastructure managers.
The pension fund will be doing the search in conjunction with its consultant, Callan Associates. Both the investment staff of the pension fund and the consultant will participate in the process.
The structure of these investments will be in a commingled fund or club fund strategy. This means that the pension fund will be open of several or small group of investors in a fund format.
Alaska Permanent Fund believes that are several features that make infrastructure attractive.
Stuart pointed out: "These assets have a monopoly in their area, they have low correlation to any other kind of asset class and can be an inflation hedge."
The kinds of assets include toll roads, water or power utilities and communication networks. The commingled funds would be looking for assets all over the US.
APF figures that it would be possible to achieve real returns on infrastructure in the range of 5% to 6%.
The fund now has a 10% targeted allocation for real estate, which is also is the actual amount invested in the asset class, giving its real estate portfolio a current value of $3.7bn.