Alaska reports $150m in private credit commitments left for fiscal year

APFC may fall short of its 17% allocation goal for real assets and private income funds – which includes private credit – in FY 2018.

The Alaska Permanent Fund Corporation has $150 million remaining for private credit funds for the 2018 fiscal year out of the $404 million earmarked for commitment, according to May meeting documents.

So far, the Juneau-based sovereign wealth fund has parked $254 million into four private credit funds and one direct investment: TPG TAO 4.0 ($100 million), Atalaya Asset Income Fund IV ($50.0 million), Monroe Capital Private Credit Fund III ($50.0 million), Alchemy Special Opportunities Fund IV ($38.5 million) and a direct investment into Diligent Corporation ($15.9 million). APFC currently has about $950 million in uncalled capital commitments.

The FY 2018 target real assets and private income fund allocation for this portfolio is 17 percent, but APFC may fall short of that goal. Assuming APFC meets its capital commitment targets, the allocation is projected to be $8.2 billion in assets, or 13.16 percent of the fund. In addition to private credit, this portfolio includes investments in infrastructure, income opportunities and real estate.

APFC also laid out its pacing plan for the coming years. It intends to make an annual average allocation of $770 million in assets to the private credit portfolio from 2019-21 and an average of $168 million per year from 2022-26. Private credit will drive 35 percent of the long-term growth in the real assets and private income portfolio.

The limited partner wants to accelerate growth in the same category so that it holds $14.8 billion by 2021, representing a 21.75 percent compounded annual growth rate and an average of $2.2 billion in annual commitments.

By 2021, APFC expects to surpass its 2021-26 allocation target of 22 percent for the real assets and private income portfolio. From 2022 through 2026, CAGR in the portfolio is projected to drop to 3.05 percent and the growth in the portfolio will decline to an average of $480 million per year.

Marcus Frampton, who oversees the private credit portfolio, told the board’s trustees in February that he would “like to stay in the middle more than the upper market, in terms of the size of assets, and we are focused more on the US to move away from an unintentional overweight that we have toward Europe right now”.

In the May meeting, Frampton announced that senior portfolio manager Jared Brimberry would take over the management of the private debt book. Brimberry joined APFC in March 2016 to be part of the private income team. Before that, he spent nearly four years working as a financial analyst for JPMorgan’s leveraged finance and corporate client banking team.

APFC uses a capital allocation model which projects a one-year arithmetic return to the private credit portfolio of 6.95 percent and a 10-year geometric return of 5.75 percent per annum. These estimates surpass fixed income portfolio projections of 4.1 percent and 4.05 percent, respectively, and fall below APFC’s expectations for long-term PE returns of 10.6 percent and 8.5 percent.

APFC’s balance sheet holds $58.92 billion in plan investments, as of 31 December, with public and private credit constituting the smallest slice at $1.28 billion, or 2.13 percent of investments and a 12.3 percent increase from 2016 levels.