Current weather

  • Scattered clouds
  • 54°
    Scattered clouds

Changing way fund managed

Trustees encourage legislators to combine principal, earnings

Posted: Friday, November 15, 2002

After two days of meetings, the Alaska Permanent Fund Corp. Board of Trustees sent an exact message to Alaska legislators: change the way the fund is managed to combine both fund principal and earnings into a single pool of money.

With several board members likely to be replaced when Governor-elect Frank Murkow-ski's administration takes over next month, the board decided not to recommend any new legislation regarding the proposal. Instead, following a lengthy discussion on the merits of the so-called POMV (percent of market value) plan, the board approved a motion to send a transcript of the meeting to Juneau.

The proposed plan, which would require both passage in the Legislature as well as a vote of the people, would allow the fund to work like an endowment. In effect, it would combine the fund's principal and earnings into a single account, of which 5 percent of the fund's market value would be available for dividends and state spending. Currently, only fund earnings can be used.

A similar plan was passed by the state House of Represen-tatives last year, but could not win passage in the Senate.

 

Board of Trustees members Eric Wohlforth and Clark Gruening talk during Thursday's meeting.

Photo by M. SCOTT MOON

Board members expressed frustration at the Legislature's past failure to endorse the plan.

"(The Legislature's) neglect to do that last year ... certainly will cause the dividend to be lower this year," said board member Jim Sampson.

"I was surprised the Legis-lature did not allow the people to vote on a constitutional amendment."

Other trustees echoed the sentiment that the POMV plan is the best way to ensure the fund continues to pay dividends, as well as ensure it continues to grow.

"The notion of principal in a modern endowment is an anachronism," said trustee Wilson Condon.

The board decided not to recommend any legislation because of the fact that a new board will soon be in charge of the fund's management.

Instead, they decided a plan would garner more support if new members --and the Murkowski administration -- felt they had some input on getting the plan implemented.

"Some (trustees) feel we ought not thrust it on a new administration," board chair Eric Wohlforth said Thursday, following the conclusion of the meeting.

"We think it's an important issue," Wohlforth said. "But we did not want to be pushy about it at this point."

In addition to the constitutional amendment question, the trustees also took up several other matters pertinent to the fund. Among them: n The board will begin looking for a new fixed-income enhanced products manager. The move came about as a result of the trustees losing confidence in current manager Deutch Asset Management following that firm's failure to disclose an investment banking arrangement with Hewlett Packard during a recent proxy vote.

The trustees believe Deutch acted improperly in its use of the fund's proxy votes. That failure, in part, led the board in March to institute new rules regarding proxy votes that require staff to report annually all votes made on behalf of the fund by fund managers.

Trustees angrily criticized Deutch's handling of its votes.

"We need to feel comfortable with who we're dealing with, and I don't feel comfortable with Deutch," Sampson said.

The board felt a strong message needed to be sent to managers who don't adequately disclose investment banking relationships between financial institutions and corporations.

"Unless we stand up and make our views known on this, these people are going to think it's fine," Wohlforth said.

n After hearing presentations from three firms, the board chose Boston-based Wellington Manage-ment Company as a new Real Estate Investment Trust (REIT) manager. Wellington was chosen over Chicago-based Heitman Real Estate Management and Berkeley, Calif., firm Lend Lease Rosen Management to manage $150 million of the fund's real estate assets.

BYLINE1:By MATT TUNSETH

BYLINE2:Peninsula Clarion

After two days of meetings, the Alaska Permanent Fund Corp. Board of Trustees sent an exact message to Alaska legislators: change the way the fund is managed to combine both fund principal and earnings into a single pool of money.

With several board members likely to be replaced when Governor-elect Frank Murkow-ski's administration takes over next month, the board decided not to recommend any new legislation regarding the proposal. Instead, following a lengthy discussion on the merits of the so-called POMV (percent of market value) plan, the board approved a motion to send a transcript of the meeting to Juneau.

The proposed plan, which would require both passage in the Legislature as well as a vote of the people, would allow the fund to work like an endowment. In effect, it would combine the fund's principal and earnings into a single account, of which 5 percent of the fund's market value would be available for dividends and state spending. Currently, only fund earnings can be used.

A similar plan was passed by the state House of Represen-tatives last year, but could not win passage in the Senate.

Board members expressed frustration at the Legislature's past failure to endorse the plan.

"(The Legislature's) neglect to do that last year ... certainly will cause the dividend to be lower this year," said board member Jim Sampson.

"I was surprised the Legis-lature did not allow the people to vote on a constitutional amendment."

Other trustees echoed the sentiment that the POMV plan is the best way to ensure the fund continues to pay dividends, as well as ensure it continues to grow.

"The notion of principal in a modern endowment is an anachronism," said trustee Wilson Condon.

The board decided not to recommend any legislation because of the fact that a new board will soon be in charge of the fund's management.

Instead, they decided a plan would garner more support if new members --and the Murkowski administration -- felt they had some input on getting the plan implemented.

"Some (trustees) feel we ought not thrust it on a new administration," board chair Eric Wohlforth said Thursday, following the conclusion of the meeting.

"We think it's an important issue," Wohlforth said. "But we did not want to be pushy about it at this point."

In addition to the constitutional amendment question, the trustees also took up several other matters pertinent to the fund. Among them: n The board will begin looking for a new fixed-income enhanced products manager. The move came about as a result of the trustees losing confidence in current manager Deutch Asset Management following that firm's failure to disclose an investment banking arrangement with Hewlett Packard during a recent proxy vote.

The trustees believe Deutch acted improperly in its use of the fund's proxy votes. That failure, in part, led the board in March to institute new rules regarding proxy votes that require staff to report annually all votes made on behalf of the fund by fund managers.

Trustees angrily criticized Deutch's handling of its votes.

"We need to feel comfortable with who we're dealing with, and I don't feel comfortable with Deutch," Sampson said.

The board felt a strong message needed to be sent to managers who don't adequately disclose investment banking relationships between financial institutions and corporations.

"Unless we stand up and make our views known on this, these people are going to think it's fine," Wohlforth said.

n After hearing presentations from three firms, the board chose Boston-based Wellington Manage-ment Company as a new Real Estate Investment Trust (REIT) manager. Wellington was chosen over Chicago-based Heitman Real Estate Management and Berkeley, Calif., firm Lend Lease Rosen Management to manage $150 million of the fund's real estate assets.



CONTACT US

  • 150 Trading Bay Rd, Kenai, AK 99611
  • Switchboard: 907-283-7551
  • Circulation and Delivery: 907-283-3584
  • Newsroom Fax: 907-283-3299
  • Business Fax: 907-283-3299
  • Accounts Receivable: 907-335-1257
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING

MORRIS ALASKA NEWS