State misuses law about public disclosure to keep Permanent Fund secrets

The Alaska Permanent Fund Corp. prohibits Alaskans from knowing the details under which hundreds of millions will be invested in Alaska by the Permanent Fund Corporation.

The corporation has hired two firms to invest up to $200 million in Alaska. But it won’t allow Alaskans to know how much it is paying those firms for the privilege of investing state money or release the contracts with the two companies.

They are public contractors. The public has a right to know how much they are getting paid.

The corporation cites this state law as the justification for secrecy: "Information in the possession of the corporation is a public record, except that information that discloses the particulars of the business or affairs of a private enterprise or investor is confidential and is not a public record."

But that law does not convey a blanket grant of secrecy.

it twists the “public record” law beyond recognition to claim it allows the Permanent Fund corporation to keep secret how much McKinley Capital Management of Anchorage and Barings, a giant firm owned by Massachusetts Mutual Life Insurance Company, will earn for investing $200 million in Alaska.

The permanent fund corporation said a “strategic approach to identifying and supporting talented private market fund managers and investments within Alaska will target a rate of return and a risk profile consistent with the similar investments outside of Alaska.”

The Permanent Fund, throughout its history, has focused nearly all of its investments Outside. The biggest reason was that much more money could be made Outside. A second reason was the aversion to turning the fund into a development bank that would take on projects for political reasons.

Outside investments limited the risk that the fund would invest in in-state boondoggles repackaged in glossy brochures as brilliant opportunities with “a rate of return and a risk profile consistent with the similar investments outside of Alaska.”

Because of the increased possibility of political influence, the $200 million in potential Alaska investments deserve more attention as they are chosen. That can’t happen with the Permanent Fund secrecy plan.

We know the state is paying Clark Penney $8,000-a-month under a no-bid commerce department contract laundered through the Alaska Industrial Development and Export Authority because the document is public information. By the logic employed by the Permanent Fund, that information should be a secret because it “discloses the particulars” of Penney’s business.

I can imagine that some things should be kept secret by the corporation. But we should know how much Alaskans are paying people to invest money for them and the specifics of the investments.

It is probable that the Permanent Fund, as a practical matter, has always been able to hide every detail of its internal workings. The Permanent Fund investments and investment decisions have rarely received scrutiny during the last four decades from anyone outside the corporation. Even the Legislature has paid little attention to the specifics.

The issue is not unique to Alaska. In Texas, the Houston Chronicle reported in 2016 how the Texas Permanent School Fund investments details are kept hidden from the public. California approved a law requiring more disclosure on fees starting in 2017 for investments by public pension funds. Other states have followed, but “few private equity managers have shown much enthusiasm for the increased transparency,” according to this 2018 account in Pensions & Investments.

At a minimum, investment decisions on Alaska projects, which could be driven by politics, need to be more transparent than allowed by the corporation's interpretation of the law. The management contracts should be made public along with details about Alaska investments.

Barings said it has created the “Alaska Future Fund” with its $100 million allocation to invest in such things as “real assets, natural resources, transportation and infrastructure.” These are categories that could include everything from the Alberta railroad and the Donlin Mine to oil and gas projects.

A company press release quotes Anthony Sciacca, head of Barings Alternative Investments, as saying, “The Alaska Future Fund addresses a pressing need faced by many institutional investors and communities seeking access to unique infrastructure and real assets projects, and aims to help catalyze growth in Alaska's local market.”

McKinley Capital said it has created a fund that CEO Rob Gillam says will “focus on investing in Alaska’s most promising small- to medium-sized businesses, entrepreneurs, and emerging private equity and venture capital managers.”

He said the firm has created the Alaska Private Investment Advisory Board, which “will include prominent Alaska angel investors, entrepreneurs, business executives, and public leaders,” who will help guide investment decisions.

The Alaska investments will not be disclosed in advance, but McKinley and Barngs will give quarterly reports to the board on where they opt to put the money.

I’ve asked Permanent Fund CEO Angela Rodell and APFC board members, who set policy for the permanent fund, for comment. If they reply, I will post their comments here.

Dermot Cole6 Comments