Barings is launching a so-called fund-of-one for the Alaska Permanent Fund Corp. to make private investments that will benefit the state of Alaska, the firm announced on Thursday.
Alaska Permanent will make an initial commitment of $100 million to the Alaska Future Fund. Earlier this week, McKinley Capital announced it has created a separate $100 million fund-of-one for Alaska.
Among other things, the Future Fund will put money into real assets, natural resources, transportation and infrastructure, and other investments that are intended to grow the local economy and support future private market opportunities in Alaska.
“As we look for investment opportunities that will help develop Alaska’s economy and generate market-based returns, we’re also hopefully attracting additional capital to the state,” said Mina Pacheco Nazemi, managing director and member of the funds and co-investments team at Barings Alternative Investments, in an interview.
The fund will support projects or companies that are based in or have plans to be in the state, or have investment operations in Alaska. The fund may work alongside private equity sponsors in similar deals as well and help capitalize fund managers.
“In theory, what Alaska is trying to do is to cultivate and get more sponsors to look at Alaska and at investment opportunities in the state,” Pacheco Nazemi said. “Most managers in the lower 48 don’t know Alaska. There are opportunities that have been overlooked.”
Still, “the return component is critical,” Pacheco Nazemi said. “This is not a philanthropic or social impact project. We want to make sure that if we identify a specific opportunity, it’s not just our capital coming into the deal. We might attract other investors, and you can only do that if you generate market-based returns.”
[II Deep Dive: A Sovereign Wealth Fund and an Asset Manager Open a Region]
The Alaska Permanent Fund has created a number of unique partnerships with asset managers as a way to tap into unique expertise and resources not always available to state sovereign and pension funds. In April 2018, Alaska Permanent formed a venture with McKinley to create a quantitative fund to invest in the Middle East, Africa, and South Asia. The fund was designed to open the region to more foreign investment and allow Alaska to benefit from being an early investor. McKinley is based in Alaska as well.
Alaska is also behind Capital Constellation, which invests in early-stage private equity, infrastructure, real estate, and alternatives managers. In addition to Alaska Permanent, Constellation is backed by RPMI Railpen and the Public Institution for Social Security of Kuwait and is advised by alternatives manager Wafra.