The former chief executive of the US$83 billion Alaska Permanent Fund, Angela Rodell, has delivered a strident criticism of board members who shocked the sovereign investor world by sacking her last month.

The controversy surrounding her surprising dismissal has heightened following the publication of a letter to the Legislative Budget and Audit Committee by Rodell. In the letter, she claimed she believes her removal was “political retribution for successfully carrying the Board’s mandate to protect the Fund and advocate against any additional draws over the [Percent of Market Value] POMV spending rule … which is contrary to [Alaska] Governor Dunleavy’s agenda. It is this direct conflict of agendas that contradicts the statement made by [APFC] Chair Richards to the Senate and House Rules on December 15, 2021 that ‘politics had no part in the [Board’s] decision.”

APFC’s POMV rule on withdrawals from its earnings reserve account, which was established in FY2019, is based on a percentage of the average market value of the fund for the first five of the preceding six fiscal years. For FY2019-FY2021, it was set at 5.25% and for FY2022 reduced to 5%. However, in his election campaign for governor in 2018, Dunleavy had sought larger withdrawals. The board vote to remove Rodell was approved by 5-1; all those who voted in favor are Dunleavy appointees, the single vote against was cast by an appointee of Dunleavy’s predecessor. Governor Dunleavy denies any involvement in Rodell's dismissal.

Rodell – who was the world’s only female SWF chief at the time of her dismissal - has not spoken publicly on her termination, which occurred shortly after a performance review. CFO Valerie Mertz was appointed acting CEO.

The ex-CEO was not afraid to question orthodoxy as she looked to grow the fund, which may have generated antipathy from some quarters. In an interview with Global SWF in August, Rodell questioned the distribution of dividends to Alaskan citizens, which has totalled US$26 billion to date.

She said: “It is a controversial issue, and there is a significant debate around the dividends’ future. It proves the misalignment that can exist between the many stakeholders when the traditional uses of the Fund and the state’s revenue generation needs become conflicting interests. APFC’s mandate is to manage and invest the assets; however, the politics around the use of the Fund can make it challenging.”

She concluded the interview by remarking, “For the next six years, I hope that we settle the issue of the dividends, and the State of Alaska can share a common vision on how to use the Fund. I also hope to continue building up our teams and having a succession plan in place, making sure that we build something sustainable and lasting.”

Having headed the fund for more than five years, Rodell notched up a strong performance. APFC data shows that she made a significant positive impact on the fund’s performance during her tenure. Statutory net income hit an all-time high in FY2021, delivering US$7.9 billion on the back of a record-breaking 29.7% return – one of the best annual performances in the sovereign investor universe.

In terms of five-year gains, Rodell delivered US$23.8bn for the fund compared to the US$13bn consolidated net income in the five year to end-June 2015 – nearly double the net gain. In terms of the five-year annual average return, under Rodell’s leadership APFC secured 1.7% above the benchmark – significantly higher than the 1.1% recorded for the five-year period before she joined.

While the 2021 return benefitted from a bullish stock market amid a bounceback from global lockdowns, over the five-year period much of the gain can be attributed to the expansion in private equity allocation under Rodell; at end-March 2021, APFC’s largely externally managed private equity portfolio reported an astonishing 65% return.

The robust performance led legislators to demand clear answers as to why the CEO was so abruptly kicked out of her position. Sen. Natasha von Imhof (R-Anchorage) asked, “What direction do the trustees want to take the fund? I think Alaskans should be given answers to these questions, particularly for such a high-profile position. And to me, it’s just so curious, especially given the tremendous performance of the fund under Ms. Rodell’s leadership.”

Sen. Gary Stevens (R-Kodiak) and Rep. Bryce Edgmon (I-Dillingham) wrote to Board Chair Craig Richards: “Ms. Rodell’s track record is nothing short of exemplary, she has always been a steadfast professional, and did everything within her power to shield the Fund from outside political interference.”

Rodell planned to increase the fund’s weight in private markets from 31% in 2021 to 40% by FY2025. She explained that “The main reason is to aim at maximizing returns while reducing volatility. Private Equity has been a very good asset class for us and we want to keep a strong exposure to it. Our target is to achieve a CPI + 5% return in a ten-year horizon, and we are not alone in the belief that public markets are not going to perform as strongly as private markets will in the next ten years.”

Rodell’s steering of the fund into new waters to fulfil its mandate and targets has shifted the organization’s internal culture. In her letter, she stated, “That type of growth [in AUM], especially in labor intensive asset classes like private equity, necessitated ongoing resource needs - personnel, data, risk, technology - to maintain the performance.”

She added, “I set a very high bar for both myself and the staff that work for me. We affirmed in staff meetings and retreats that we view ourselves as investment professionals working for a company that is owned by the State of Alaska - not as state workers that invest money. We are all career finance professionals. This vision produces a culture of excellence but can also make certain staff uncomfortable and unhappy with the correspondingly high levels of dedication and performance expected of them.”

For certain, Rodell has made a lasting impact on APFC’s organization and strategy. It remains to be seen whether the State of Alaska can persuade a financial professional of similar calibre to lead the fund, based in Juneau. The long-standing struggle faced by Californian public pension fund CalPERS in finding a suitable CIO demonstrates the challenge facing state-owned investors in C-suite recruitment. How Rodell’s successor will stamp their vision on the fund will be constrained by a highly political context for a fund that is relied upon to help fill the state’s coffers.

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