Through an innovative “external CIO” approach, Alaska’s $40 billion sovereign wealth fund has been able to outsource a portion of its active risk, according to Alaska Permanent Fund Corporation chief investment officer, Jeffrey Scott. He was speaking in Banff at the 2011 Global Investment Conference.
Through strategic allocation of active equity risk to five major firms, including PIMCO and Bridgewater, Scott said that Alaska Permanent has been able to diversify by leveraging each firm’s different approach to risk profiling. He says this has been a highly successful combination of styles and, in the coming years, Scott says the sovereign wealth fund will aim to outsource 40% of its active risk to external managers.
Scott’s presentation also focused on trustee education and communication. As Alaska Permanent has moved to a risk-based approach, it has changed the way it communicates performance to the board. Quarterly reports from the CIO now focus on relative contribution to risk so that trustees have a firm grasp on how the fund’s activities and decisions contribute to its overall risk profile.
More coverage to come….