Alaska Permanent Fund Corporation (APFC) is set to enhance its investment activities in European private equity markets starting in 2025. With a current portfolio valued at $83.1 billion, the institution aims to maintain its 15% exposure to Europe, which has seen a decline in recent years due to reduced investment activity.
Key Takeaways
APFC will increase its European private equity investments to maintain a 15% portfolio exposure.
The focus will be on the UK, DACH (Germany, Austria, Switzerland), and Nordic regions.
The institution plans to raise its overall private equity allocation to 18% for fiscal year 2025.
APFC aims to deploy at least $1.5 billion into private equity in the upcoming fiscal year.
APFC's Strategic Shift
Allen Waldrop, deputy CIO for private markets at APFC, indicated that the fund had not been active in Europe over the past four years, necessitating a strategic reload to prevent its European exposure from shrinking. The decision to ramp up investments comes as the fund prepares to counteract the effects of previous underinvestment.
Waldrop emphasized the importance of maintaining a balanced portfolio, stating, "We’ve got to do more to keep it at 15 percent, otherwise it’s going to shrink down." This proactive approach reflects a broader trend among institutional investors who are reassessing their strategies in light of changing market dynamics.
Target Regions and Market Dynamics
APFC's renewed focus will primarily target the following regions:
United Kingdom
DACH (Germany, Austria, Switzerland)
Nordic Countries
Waldrop noted that while there used to be a significant presence in Eastern Europe, geopolitical instability, particularly due to the Russia-Ukraine conflict, has made investors more cautious in that area. Additionally, he pointed out that Southern Europe is not currently a focus for APFC.
Challenges in the European Market
The European private equity landscape has become increasingly fragmented, complicating investment strategies. Waldrop remarked, "Europe is not a homogenous market anymore; it’s a very different place than it was 10 or 15 years ago." This fragmentation presents challenges for investors as they navigate a more complex market environment.
Recent research from StepStone highlights a trend where many limited partners (LPs) have shifted their capital away from Europe, with only $1 committed to European general partners (GPs) for every $3 allocated to North American managers over the past five years. Despite these challenges, Nordic buyout managers have outperformed their counterparts in other developed regions, achieving a mean realized total value multiple of 2.7x from 2003 to 2023.
Future Plans and Financial Goals
In a significant shift from previous strategies, APFC plans to increase its private equity allocation from 16% to 18% for fiscal year 2025. This decision reverses a prior plan to reduce exposure to 15% by FY 2025.
CIO Marcus Frampton announced that APFC aims to deploy at least $1.5 billion into private equity in the upcoming fiscal year, a notable increase from the $1 billion allocated for the current year. This commitment reflects a renewed confidence in the private equity market and a strategic pivot towards enhancing the fund's overall performance.
As APFC prepares to ramp up its European investments, the institution is positioning itself to capitalize on emerging opportunities while navigating the complexities of a changing market landscape.
Sources
Alaska Permanent to ramp up Europe pacing in 2025, Private Equity International.