It\u2019s considered very good news when Alaska Permanent Fund Corporation (APFC) managers announce quarterly earnings of $2 billion. Whether it boosts our dividends or becomes a source of revenue to run state government, we want that pot to keep growing. But like most things in a society ruled largely by economics, we almost never look beyond the numbers. And even if what we don\u2019t know doesn\u2019t seem to hurt, it\u2019s no excuse for benefiting from the misfortune of others.<\/p>\n
When the Alaska Journal of Commerce reported APFC\u2019s earnings last week, the article mostly discussed fund balances and quarterly earnings. It did mention diversification of investments and Gov. Bill Walker\u2019s proposal to use a portion of the earnings to pay for state government. But it did so only in terms of possible impact to the ledger\u2019s bottom line.<\/p>\n
The article concluded with returns from different sectors. \u201cReal estate holdings\u201d it tells us \u201creturned 2.27 percent.\u201d That\u2019s it. Just the numbers, as if there\u2019s no people on the other side of the businesses Alaska money is supporting.<\/p>\n
I know. The Permanent Fund Board\u2019s guiding philosophy mentions nothing about choosing businesses based on their integrity or the value they contribute to society. The legislative defined goal is \u201cto maintain safety of principal while maximizing total return.\u201d <\/p>\n
One real estate investment I feel is worth questioning is American Homes 4 Rent (AH4R). Last month the Alaska Dispatch News called AFPC\u2019s initial investment in this company \u201ca winning bet.\u201d It\u2019s seen a 30 percent rise in stock values since 2013. In September, after selling just over half its shares, AFPC netted $325 million.<\/p>\n
The investment wasn\u2019t just in the company\u2019s stock. In 2012 AFPC put up $600 million for the company\u2019s startup and two years later formed a joint venture with AH4R. Unlike most stock market investments, this was also a business relationship.<\/p>\n
So what is Alaska\u2019s money directly supporting? The acquisition, renovation and leasing residential properties, most of which were empty homes with foreclosed mortgages following the subprime lending crisis.<\/p>\n
Now how would any of us feel if one of those homes contributing to the outstanding returns on our investment had once belong to a family member? Or if a friend was one of the many renters nationwide accusing the landlord of rigging fees and neglecting maintenance? <\/p>\n
AH4R was created by a California billionaire experienced in the rental market. B. Wayne Hughes Jr. began earning his money running a family-owned business that rents storage facilities to the public. He\u2019s not a bad guy. He\u2019s used some of his wealth to create Serving California, a foundation that aids crime victims, rehabilitates ex-offenders and assists veterans with post-traumatic stress disorder.<\/p>\n
But like a vulture, Hughes circled the foreclosed properties with a focus on feeding himself. And APFC helped make it a feast.<\/p>\n
Another APFC investment that poses an ethical dilemma is Alexion Pharmaceuticals Inc. Since 2012 this company has seen it share value increase about 40 percent. But a lot of its profits came from charging over $400,000 a year for Soliris, a drug they developed for people with a rare blood disease.<\/p>\n
Currently APFC has nearly $5 million of unrealized losses on this investment. Meanwhile Alexion\u2019s CEO is reportedly worth $170 million. And this week the company was hit with a class action lawsuit alleging \u201crevenues from Soliris sales were unlikely to be sustainable; and that as a result of the above, Alexion\u2019s public statements were materially false and misleading at all relevant times.\u201d <\/p>\n
Let\u2019s hope Juno Therapeutics doesn\u2019t go in that direction. The Seattle-based biotech company is a collaboration of the Fred Hutchinson Cancer Research Center, Memorial Sloan-Kettering Cancer Center and Seattle Children\u2019s Research Institute. They\u2019re trying to develop a method to genetically program cells in a patient\u2019s immune system to chase down and kill cancer cells.<\/p>\n
APFC earned more than $200,000 on that investment and still own stocks in it. But that\u2019s a business I want to succeed even if they, and AFPC, wind up losing money in the long run.<\/p>\n
My intent here isn\u2019t to criticize anyone at APFC for their investment decisions. They\u2019re just doing their job. And doing it well when they help the Permanent Fund grow.<\/p>\n
I\u2019m highlighting these stories to make a point that applies to us all. If we don\u2019t want to be to associated with the profits of predatory businesses, then we need to define successful investments as putting money in companies that make a valuable contribution to society while showing compassion for the misfortune and suffering of others.<\/p>\n
\u2022 Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector.<\/p>\n","protected":false},"excerpt":{"rendered":"