What to do about natural-dividend windfalls is a theme on Den's mind this year #1589657 #1565551 #1515430

Today, the Alaska Permanent Fund has assets of $88 billion. It’s not as big as Norway’s oil fund, which we discussed some time ago, but it’s the closest America has to a sovereign wealth fund. Each year, the state is allowed to draw 5% from the fund to finance government services and to pay a dividend to residents. This year, eligible residents will each receive a check for $1,200.

But interestingly, at first it consisted only of bonds -- even though this was, in principle, a perpetual fund lasting looong into the future #1609745

. In 1999, its mandate was broadened to allow a 5% allocation to alternative investments and, in 2004, the fund made its first foray into hedge funds. [Those] were made through a fund-of-funds program. Alaska hired three managers to select hedge funds on its behalf but performance was disappointing. In the ten years through to 2016, those hedge funds generated a 3.4% annualized return

How about this for epic alpha investing? Nine years, 6.7% annualized return and no down years. Sexy:

The shift in approach paid off. Alaska now allocates to 18 managers, accounting for 8% of its total portfolio. When markets slid in 2022, the hedge fund part of its portfolio was up about 8%. In the nine years since the restructuring, the average annualized return of the hedge fund portfolio has been 6.7% with no down years and a low correlation to overall markets.

"The problem, though, is that “the more money we push into absolute return, the harder it is to get that really special return because the good funds are capacity constrained.”

I'm sure that's why Undisc can't rule the ROI league at @Team_Predyx anymore!

THANKFULLY,

Perhaps Millennium has an answer to that.
When Alaska first invested, Millennium was a $35 billion fund; it is now knocking on the door of $100 billion. Its return in October was weak, down 2.3%, but that sits within its risk tolerance limits and compared with other funds, it could have been worse. How it performs in November, when many funds have struggled, will be key.

...but, "to see what Millennium is up to," we need to bypass a paywall. And Den is cheap (poor? lazy?!) so there's no Net Interest subscription!

We shall never find out what the secret Millennium hedge fund sauce is.