APFC targeting $750m for timber, other private income in FY2018

The private income allocation category has already surpassed the $700m target the limited partner set for fiscal year 2017.

The Alaska Permanent Fund Corporation plans to deploy a target amount of $750 million for its allocation category that includes timber for fiscal year 2018, as reported by sister title Private Debt Investor.

The $58.58 billion sovereign wealth fund will pour the amount into its private income bucket, which along with timber includes infrastructure, private credit, income-related special opportunities, direct investments and joint ventures, according to documents from the May 16 board meeting. The total allocation to that portfolio is $1 billion, which allows for “flexibility given the lumpy nature of some opportunities,” a memorandum read.

In fiscal year 2017, APFC had set a $700 million target for private income and a maximum target of $900 million.  So far, the fund has committed $754 million, with $525 million to infrastructure, $229 million to private credit and $25 million to special opportunities. The fund’s fiscal year starts 1 July and ends 30 June.

An APFC spokeswoman declined to comment.

In September 2015, APFC joined the Washington State Investment Board and the Oregon Public Employees Retirement Fund in helping to establish Twin Creeks Timber, a joint venture between Silver Creek Capital Management and Plum Creek Timber.

Marcus Frampton, APFC director of private income, explained to Agri Investor in April why the fund chose to invest through the Twin Creeks structure rather than a traditional fund.

“When you are investing at this size, there are always going to be firms willing to do separate accounts that could have longer lives than a co-mingled fund,” he said. “Each has its drawbacks, but if you compare timber to LBOs, infrastructure or commercial real estate, the deal volume is really low. So if you go into a blind pool fund, you don’t have a whole lot of certainty about what assets are going to come up for purchase and you don’t have control over what the sponsor does.”

The increase in private income allocation comes as APFC looks to increase that allocation category from a target of 5 percent of the portfolio to 9 percent, a shift that it hopes to hit in 2021.

Private income currently makes up 5.2 percent of the $58 billion fund. Each fiscal year the target will creep up by 1 percent, meaning in fiscal years 2018, 2019 and 2020, the goals will be, respectively, 6, 7, and 8 percent.

-Reporting by Andrew Hedlund and Chris Janiec.