Permanent fund performance.

• Author: Cox, William
• Position: Alaska Trends

Many Alaskans are familiar with the Permanent Fund Dividend (PFD), which we each receive from a portion of the State's investment earnings of the Permanent Fund's approximately $37.6 billion in assets (as of Oct 2010). However, many of us have not considered how the Permanent Fund has performed relative to other possible investments or in relation to the overall financial markets. In this analysis, market indices, such as the S&P 500 and DJIA will be used as a proxy for the overall market.

[GRAPHIC OMITTED]

What is the most appropriate way to look at the returns of the Permanent Fund in relation to these other investments? When assessing the performance of any investment, two items must be considered: 11 the return generated from the initial investment net of fees, both in total and relative to a benchmark (often market indices) and 2) the risk assumed by the investor when investing in the particular investment vehicle.

All else being equal, the more risk an investor assumes the higher return the investor should expect to earn to compensate for this increased risk. Thus we can compare the returns and risk assumed within the Permanent Fund's investments and several market proxies to determine how the Permanent Fund's...