Alaska Permanent Fund: sweet deal for sourdoughs.

• Author: Swagel, Will
• Position: ECONOMY

With so much nineteenth and early twentieth century Alaska lifestyle capturing the public imagination on reality TV, it's easy to overlook what a twenty-first century kind-of-place the Great Land can be.

The Alaska Permanent Fund--now valued at about $50 billion--is well regarded among sovereign wealth funds (SWF) worldwide for its excellent management and its successful returns. The Permanent Fund was among the very first US SWFs to embrace global investing. And its risk management protocols are a model that other SWFs look to for guidance. Alaska's Fund garners the highest marks for transparency.

SWFs are state-owned investment funds and are usually created to manage and preserve the revenue stream from resource development, often the oil industry. But the pools of money may come from revenue from other resources, such as minerals or even money accrued from trade. These funds are mostly managed for the long-term.

Some SWFs are formed to invest in industry development, others to build infrastructure or provide public services. The stated aim of the Alaska Permanent Fund is to create a revenue stream for Alaska that will continue indefinitely, after direct oil revenues have dwindled or disappeared. Today, the Fund's earnings on its principal dwarf the amount of money collected annually in royalties.

The Alaska Permanent Fund is unique worldwide in that it pays a yearly cash dividend. The Permanent Fund itself was meant to contain government overspending by putting some oil revenues out of legislative control. But the fund's designers went a step further in thinking that an annual dividend would keep the public focused on growing the fund instead of spending the principal on popular projects.

Those designers were spectacularly right.

"Alaskans are very interested in their dividend and to some degree it has kept the public eye on the fund," says Valerie Mertz, the Alaska Permanent Fund Corporation's CFO, also serving this summer as Acting CEO. "It has motivated us to be transparent and always mindful of our mission to the people of Alaska."

To date, the Permanent Fund has paid out more than $23 billion in dividends to Alaskans.

Sovereign Wealth Funds Proliferate

The Alaska Permanent Fund dates back to 1976 when Alaska voters supported it two to one in the general election. The earliest US Fund was established in 1854 by Texas, using the revenues from public lands to support education.

In the twenty-first century, however, the interest in SWFs...