APFC goes direct in credit with $1bn programme, $500m in co-investments

The sovereign wealth fund already invests directly in private equity and real estate.

The Alaska Permanent Fund Corporation is launching a $1 billion direct credit investment programme and a $500 million private credit co-investment partnership with Pathway Capital Management.

The direct investment effort, dubbed Alaska Direct Alternative Credit (ADAC), will include a liquid book of internally managed non-investment grade high yield exchange traded funds, individual bonds and cash as well as a private portfolio of co-investments made alongside APFC’s private credit managers.

Juneau-based APFC, which could not be reached for comment, hopes to invest the initial $1 billion over a time period of two years, according to materials from last week’s board meeting. Some $500 million will be invested at inception into the liquid positions, while the private portfolio will be funded via capital calls from APFC’s private credit managers. Realised gains will be reinvested in ADAC.

The liquid investments will be managed by the fixed income team, namely director Jim Parise and senior portfolio manager Matt Olmsted. The private portfolio will be overseen by the private income team, led by director Marcus Frampton and senior portfolio manager Jared Brimberry.

“The publicly traded non-investment grade bond portfolio will be managed… with the goal of providing a more liquid proxy to the private portfolio, allowing them to be more selective in their co-investments,” Parise said in a statement.

Frampton and Brimberry will oversee the makeup of the ADAC portfolio, but the guidelines suggest a tilt toward private investments, with those holdings making up more than half the entire book and the liquid positions comprising less than half of the programme. The maximum size of a co-investment is $75 million, unless the APFC’s executive director waives the policy in writing.

For its part, the co-investment partnership, named the Pathway/AK Credit Co-Investment Fund, will focus on generating co-investment opportunities across multiple strategies, credit managers and geographies. Private credit firms APFC is currently invested in include Alchemy Partners,  Atalaya Capital Management, Audax Group, Crestline Investors, Monroe Capital, Oaktree Capital Management and TPG Sixth Street Partners.

The APFC has a robust history of direct investing, as it operates $6.6 billion of private equity direct investments and co-investments and owns 56 properties in its real estate portfolio.

Through the first three months of the year, APFC made $100 million of direct private equity investments: $25 million in Camino Natural Resources, $25 million in Dental Corporation of Canada and $40 million in Sound Inpatient Physicians. It also realised $599 million from the sale of Juno Therapeutics, which Celegene Corporation bought for $9 billion in January.

The real estate portfolio consists of hotel, industrial, office building, residential and retail properties located around the world including in California, Illinois, New York and Texas in the US and abroad in Portugal, the UK and Spain.

APFC manages $64.9 billion, much of it from the state’s oil revenues.