APFC Board of Trustees Annual Meeting - Nome - Day 2

Are you online? Can you hear us?

Trustee Earls, can you hear us?

I can hear you. Yes, yes, I can hear you too. Excellent. Good, good. Thank you.

I just wanted to make sure. Uh, so with that, uh, we have all 6 trustees here, and we'll turn the floor over to Greg and Steve from Kellerman. Good morning.

Good morning, and you're free. While you reach for your button, Greg, you both hit it at the same time. Good morning, everybody. I want to thank you for setting the meeting in Nome. I get to check another Alaska city off my list.

I think this is my 10th Alaskan city in the 12 years that I've been a consultant. The Permanent Fund. This is my 12th anniversary of coming up to Alaska to make this presentation, so I want to thank you for this relationship, this very longstanding relationship that we've had between town and the Alaska Permanent Fund Corporation. And to echo Trustee Chair Bruni's statements, it's, it's great, and it's the PFD day, so congratulations to every resident of the great state of Alaska today. So as usual, we're going to spend some time today talking about both the capital markets and the overall performance of the fund, including individual asset class performance.

You heard from most of the asset class specialists yesterday, so there will be a bit of repetition today, but it's important repetition. As trustees, it's very— it makes a lot of sense for you to take a close look at how the fund has been performing over time. And as always, I will remind you that this is your time. Please stop us and ask questions. I believe we have been allotted 2 hours on the agenda, which is a lot of time, and today we are not compressed, which is kind of nice.

So we are going to start here on slide 2, which is what we call our Econo Indicators. This is a rather new slide that Callan has put together as a way to get a good snapshot of some of the trends that are impacting the overall capital markets. And I know it's a busy slide, but the idea here is out of these data points, I think there's like 15, should have counted them beforehand. We show what the 10-year range is for the data point with the full length of the bar. It's actually 2 standard deviation range.

The green is 1 standard deviation range and the orange line is the average observation over that 10-year period. That green diamond is where we are right now. And then there's a little arrow next to it pointing directionality where things have been trending in the near term. There's a couple interesting observations here. In particular, you kind of want to focus in on data points where that green diamond is far away from the orange line or even all the way off of the green bar.

So this means it's far away from its 10-year average. Or even far away from the plus or minus 1 standard deviation observation from where it has been. What I will say is there are some things on this chart that are, for all intents and purposes, good news. The U.S. economy has actually held up pretty well. GDP has continued to be positive.

That first bar here, which shows the quarter-over-quarter GDP, shows a 1.5 here, and that was actually revised up yesterday to 2.2. So GDP print continues to be positive. Employment also continues to chug along. It is—. Hasn't gone negative.

Employment has continued to grow, but it has growing— it is growing at a much slower pace. And you can see that in that third bar there, which is the employment change month over month, continues to be positive but has fallen to be a lower speed. Retail sales also continue to be positive. The first one that really jumps off the page, though, is right in the middle of this chart, and that's consumer sentiment. The consumer is very much concerned about the U.S. economy.

We don't see that in their spending. Consumer spending continues to be fairly strong, but there is concern related to the direction of the U.S. economy. This is related to clearly the inflation that we've seen from the operations in Iran and the impact on overall oil prices, but also concerns about tariffs and such. So, consumer sentiment really is low. The other one I want to point out is the 10-year Treasury yield, which is 2 lower than that.

In this observation at the end of June, the 10-year Treasury was at 4.5. As of yesterday, it's at 5.29. So it's gone up 70 basis points so far this quarter. The Treasury yields have just skyrocketed. And that's really been driven by concerns about inflation, directionality of interest rates.

Bond prices have just come down. For those of you that are familiar with bond math, when bond prices go down, yields go up. And that is very much where we are. Anybody who has any kind of fixed income exposure in their personal portfolio has seen that pain. We all likely have a little bit of exposure somewhere, even if we don't know it.

Bond prices have come down. You're going to see some negative fixed income numbers next quarter. The other thing I want to point out is spreads. And that's—. You see investment grade and high yield spreads here near the bottom of this chart.

Spreads is the differential in prices between a US Treasury and a corporate bond. Spreads are at historic lows, very, very tight, particularly here at the end of June. What this means is bond investors are just demanding bonds. They want as many bonds as can be printed. And that has resulted in a very low differential between a a corporate bond and a Treasury bond, which is typically considered to be the risk-free bond.

You should expect to see some kind of spread premium between those two. You're taking on more default risk when you buy a corporate bond than a high-yield bond. But spreads have been historically tight, particularly up through the end of June. We're going to see some of that widen out here in the third quarter. You'll see that change when we review this next quarter.

I want to stop and see if there's any questions about this rather busy chart. But a good way for us to really represent some of the things that are impacting both the U.S. economy and the global economy as a whole. Trustees, any questions on the slide, on the Frogger slide? Is that what we call it? We're trying to figure out a new name for it, actually.

Econoindicators is too long, so I like Frogger slide. It kind of looks like— It very much does. As a 1980s video game player, it very much does. Okay, continue. I'm going to flip ahead here to slide 4, which is again another good snapshot of some of the things that are impacting the market.

GDP growth in the top left, as I mentioned, it has been revised up from the 1.5 number you see here up to 2.2. That happened yesterday, so that's why it didn't make it into my presentation. Inflation in the top right is the measure of CPI and Consumer Price Index. CPI came in at the end of the quarter at 3.5, so continues to be stubbornly high. As, as we all know, the Fed target is in the 2.5 range, so definitely higher than what Fed wants to see.

The number that came out yesterday was in the 3— I think it was 3.0, so lower than what we see here, but still higher than what the Fed wants. With that CPI print that came out yesterday, the likelihood of another rate hike did come down a little bit. By year-end, but it still is priced above a 50% chance that there will be another rate hike before year-end.

The Treasury yield curve in the bottom left-hand corner, the olive green line is the June 30th yield curve. We have a normal-shaped yield curve, and it has been a very long time since we've had an upward-sloping yield curve across the entire curve. We got there in June, and we're going to have an even more upward sloping yield curve when we see this in September. And then finally, the bottom right-hand corner, this is where we can measure how the market is pricing future inflation. It's a comparison of the US Treasury yield versus the 10-year TIPS yield.

And it— what this does is it shows you what we call the breakeven, right? So how the market is pricing the anticipation of future 10-year inflation. So that green line shows you what the market is expecting inflation to be over 10 years, and it continues to be right around 2.2%. So the market thinks the Fed is going to be able to get inflation under control over 40 years, despite what we've seen happening so far this year. We may see that tick up next quarter.

We'll definitely see the yields tick up next quarter, but that differential may change a little bit.

So slide 5 is a highlight of capital market performance over the last quarter, the last year, the last 3 years. I do want to point out one thing here that the, the second set of bars here that says fiscal year to date, you'll see this in a couple places in our presentation. That's actually a relic from last quarter. So this captures 3 quarters of performance. This is June 30th.

So your last year really represents your fiscal year. So Forgive me for missing that one. You can ignore the second set of bars. I want to point out a couple things here. Clearly, those blue bars, which represent the— the dark blue is the US equity market, the light blue is the non-US equity market— continue to be the key drivers of performance.

US equities up 15.4% last quarter, up 22.8% for the last year. Non-US equities up 14.5% last quarter, up 27.7% for the last year. That non-US equity number does include emerging markets equities as well, which were up quite a bit, up over 40% last year.

Additionally, hedge funds continue to— that's the green bar— continue to rank between fixed income and equities, which is where you would expect them to be. They finally are behaving like hedge funds should behave, up about 2% last quarter and up 12% for the last year. Fixed income, which is the kind of green, the first bar, that is very dark green. All of it's kind of absolute return. The dark green bar, fixed income was positive last quarter, up about 70 basis points, up 3.8% for the last year and 4.2% for the last 3 years.

That 3.8% return last year is the same return you got in cash. So investing in Zero risk money market funds, 90-day Treasury bills, 3.8%. Investing in the full Barclays aggregate with all the risks it has, duration, credit risk, 3.8%, same return. And we'll see that trend even worse if you look out over the long term where cash continues to outperform fixed income for the last 5 to 10 years. Additionally, private equity and real estate, your other two rather dominant Private markets, positive returns with private equity up just a little bit last quarter, real estate up 1.2%.

But private equity continues to lag those public equity returns. You know, when public equity is on a roar, you would expect private equity to underperform the public markets. You definitely see that here, particularly in the last, over the last 3 years.

Looking ahead to the next slide, look at it a little bit further. Over the last 5 years, fixed income return basically 0, 0.1%. That really comes from the moves in interest rates. Interest rates going up, bond prices going down. US equity markets dominant over all of these longer-term time periods.

15% Return over the last 10 years, 14% return over the last 15 years. Very strong performance from the US equity markets. Private equity, Also positive. So while we have seen not the same skyrocketing returns in the near term, when you look out over a full market cycle and beyond into the 10-year, 15-year periods, private equity continues to perform very, very well, up 13% over the last 15 years and the strongest performing asset class over the last 20 years. And real estate, despite the blips we've seen in the near term, long-term real estate performance is positive.

4.8% Over the last 10 years, 7.1% over the last 15 years. Key here, though, is that US equity market performance— strongest performing market, strongest performing asset class, well outperforming the non-US equity space, outperforming all the alternative asset classes. What this means is portfolios that are overweight to US equities or have more in the US equity market versus the permanent fund tended to perform a bit better than the permanent fund. I want to hammer that in because when we get to our peer group comparisons later in the presentation, you will see the permanent fund's peer group comparisons do not compare great, hasn't done extremely well versus other large public funds or large endowments and foundations. And that is almost entirely driven by the lower allocation to the U.S. Go ahead to slide 8.

This is Cowen's periodic table of returns, and this is a little different flavor than we usually show. This is a rolling 3-year, 3-year window. So instead of looking at individual years or individual quarters, each of these columns looks at 3-year performance ending in various calendar periods. So kind of gives you a little bit of a longer snapshot of individual asset class returns. This gets away from getting bogged down in the US— strong US equity, public US equity performance.

And when you stretch things out to 3 years, a couple of things really jump off of this page. The US equity box, which is the dark blue, does continue to perform extremely well. It's near the top in most of these observations, but so is private equity. So while private equity hasn't done phenomenal in the near term, It is one of the top-performing asset classes in almost every one of these individual 3-year periods.

And again, the reason we show these— this chart to you every quarter is just to remind you the importance of diversification, why you don't have everything invested in a single asset class.

So let's talk about performance for the fund. Last quarter, the Permanent Fund was up 5.7%. Slightly ahead of its performance benchmark, ahead of the CPI+5 target, about 3.4% ahead of the CPI+5 target, and behind the passive index benchmark, as CIO Frampton calls it, the, the click of a mouse benchmark, which is a blend of publicly available indices. Again, these are all in public markets, so that's why it's done so well. Over the last, over the calendar year, so the first 2 quarters of 2026, the fund is up about 5.5%.

Just slightly behind the performance benchmark, pretty much in line with the CPI+5 index and trailing that passive index by about 2.9%. And for the fiscal year, about 12.4% return for the fund, 50 basis points behind the performance benchmark, ahead of the CPI+5 target by almost 4%, and behind that performance, the passive index benchmark, by about 3.8%. We'll talk about some of those key drivers coming up when we review attribution.

Longer-term performance on Slide 10. Permanent fund was up 9.8% over the last 3 years, slightly trailing the performance benchmark by about 80 basis points. 6.6% Over the last 5 years, 9.3% over the last 10 years, and 7.4% over the last 20 years. When we look at over the 10 and 20-year periods, over the 10-year period, it— the fund has outperformed all 3 benchmarks. And over the 20-year period, it only trails the CPI+5 index, and that is by 16 basis points.

So almost beating that CPI+5 target over that 20-year period. And as a reminder, that does include the period of extreme inflation that we went through post-COVID.

Looking at the overall makeup of the permanent fund as of the end of fiscal year, the fund is slightly overweight to public equity, fixed income, and absolute return and cash relative to its target. As a reminder, this is, this is a snapshot of asset allocation as of June 30th. So the cash balance does tend to fluctuate throughout the course of the year. It is also slightly underweight to real estate, private equity, and private income. All of these targets, however, are— all the current asset allocation targets are within the range of the policy.

The overall portfolio is mildly defensive versus some of your peers, but the asset allocation does differ quite a bit. So when we get to our performance comparisons, the typical large public fund has almost 50% invested in public equity. Median's about 50%. And your allocation to public equities, 32%, which is target. So quite a bit less.

Additionally, most endowments and foundations have more in alternatives and much less in fixed income. Your fixed income allocation's about 20%. The median allocation for an endowment foundation is somewhere in the 11% to 12% range. So almost half of what you have. That can be a pretty substantial driver of performance difference, particularly when there's a large differential in asset class returns like we had here in 2026 and really over the last 3 years.

For the public listening, we— you said we're at 32%. That was for last fiscal year. We've moved it up to 34% for this year, and we have a target of— is it 41%, Marcus? What's the— for over in 3 years, what's our goal for—. No, we only— we talked about longer-term targets, but we ended up acting just on a 1-year.

We just did a 1-year plan. So for some reason I thought we also did 3-year. So just—. We talked a lot about it, but that wasn't it. Got it.

Yeah, so these are the targets as of— for fiscal year '26, and that will— this will change next quarter and have the new targets for both. Okay, perfect. Thank you. I have a quick microphone pointer for John. We've had to turn meeting video off to prioritize bandwidth.

What that means is whenever you start speaking, please put yourself on record so we know who is speaking in the meeting. Wasn't that just said that?

That was Jennifer, for the record.

For the record, Jason Burney giving it back to Callan. Fucking under the table. Water bottles. Sea glasses and having my way.

Okay, so continuing the presentation, Steve Senter from Callan. Slide 12 is a little deeper dive into those asset classes. Using the same color code that we had in the previous slide to give you a feel for some of those building blocks under the hood. Particularly when we start talking about performance later in the presentation, this helps you get a feel for how large each of the individual pieces are of the asset class. So, for example, when we talk about real estate, it's very much dominated by the real estate equity portion, not the debt or REITs.

The orange bars. And then in fixed income, the US fixed income portfolio is far and away the largest portion of the US fixed income— of the fixed income portfolio.

So the next few slides look at attribution, and we do have attribution for the last quarter, the last year, the last 3 years, and the last 5 years to kind of get you a feel for what the drivers were for benchmark relative performance. And this is a lot of data. I'll walk you through some of the important points. I want you to focus in on the two columns that are three in from the left, the ones labeled Manager Effect and Asset Allocation Effect. The Manager Effect measures how your asset class has performed relative to its benchmark.

When it's positive, that means your active managers are adding value versus the asset class's benchmark. The allocation effect measures how the difference from your asset allocation, difference from its target, has impacted performance. So if you've been overweight a poor-performing asset class, that tends to be negative. If you're overweight a strong-performing asset class, it tends to be positive. The Permanent Fund tends to be pretty close to its target asset allocation, so you would expect the allocation effect to be lower versus the manager effect.

It should— the manager effect should be driving your relative performance over time. What we see over the last quarter, the permanent funds slightly outperformed its benchmark by about 17 basis points. The combination of both the manager effect and the asset allocation effect added value. In particular, strong performance from your private equity portfolio and your absolute return portfolio added relative value. There was a negative impact from both public equity and real estate, but that was really overridden by how strong relative performance you had from private equity and absolute return.

So Janet. I just wanted to make one clarifying statement that on what Steve said is that, for example, the public equity portfolio, the manager effect is not isolated to the performance of the active managers within that portfolio. It captures everything except the deviation of the total asset class weight relative to the target, which means that it could be an overweight to US equity versus non-US equity. It could be an overweight to value versus growth. It could be all these other effects that just roll up into that one.

So you have to be careful about that interpretation as being your active managers only. It's a whole bunch of stuff.

Ethan, I'm going to be honest, you lost me there. Oh, yeah, I can have you try to respond. One minute. Yeah. So one, I did say how well your managers have performed relative to their benchmark.

The key is more how well your asset class has performed relative to its benchmark and the public equity portfolio's performance. For example, on this table at the top of this chart, you can see it had a 14.51% return. The benchmark return was 14.93%. So it lagged the benchmark by about 40 basis points. That was likely due to a combination of active manager performance relative to the, their overall indices, but also how the portfolio was structured relative to its benchmark.

So the benchmark is the MSCI All Country World Index. The public equity portfolio doesn't necessarily match that benchmark's overall global asset allocation weight, country weights. So it could be overweight US versus non-US or overweight emerging markets versus developed markets. It could also have more of a tilt towards value or a tilt towards growth. And it could have a tilt towards small-cap stocks versus large-cap stocks.

All of those factors can also impact performance. And that decision is made more by Fawad and the investment team versus the asset manager. So underweight Jason Bruni, uh, for those online, uh, underweight on MAG7 would be within the manager effect. Correct. The other one we'll talk about a bit later.

We all talk about the Mag 7 in the US. Uh, in the emerging market space, we also have a, a very much concentrated benchmark now where the top 10 names of, uh, in the emerging market space make up like 35% of the benchmark. And the only reason why I mentioned this is because I don't want the board of work to think that that's just the active managers, because then that puts a lot of weight on them with in many cases they could be outperforming and these other things could be overwhelming it. And that's something that Marcus and I have talked a little bit about. Is there a way to get better attribution on that particular asset category to help clarify kind of where the value is coming from within that with a benchmark realignment potentially?

I'm going to pull ahead to look at attribution for the fiscal year. On slide 14, the fiscal year, the permanent fund lagged the benchmark by about 50 basis points, and underperformance came from a combination of both the manager effect and the allocation effect. So on the manager effect side, strong performance from fixed income and absolute return, both positive. Big drag on performance came from the real estate portfolio, from the private income portfolio, and from the public equity portfolio, all of which slightly lag their benchmarks. The allocation effect was negative as well, and that really was driven by the allocation to cash.

So holding cash a little more than the 1% target did have a drag on performance. Uh, cash was up almost 4%, but when the broad markets are up, you know, total portfolio benchmark was up almost 13%, having a little more in cash ended up having a negative impact on overall performance.

Longer-term attribution are on the next two slides. First, 3-year attribution on slide 15. The fund underperformed its benchmark by about 78 basis points over the last 3 years. Most of that came from the manager effect. Again, strong performance from fixed income and absolute return.

Sounds like a, a broken record here, but you'll hear the same story on the longer-term performance. Public equity, private equity, and real estate were the key negative contributors to performance, all of which slightly lagged their benchmarks. From an allocation effect standpoint, a little more being held in cash and being just slightly underweight to public equities versus the target ended up being a bit of a drag on overall performance. When you have a very strong performing asset class like public equities, being even slightly underweight can be a drag on performance.

And over the 5-year period on slide 16, just slightly underperforming the benchmark, about 15 basis points behind the index. Strong performance from your fixed income and absolute return asset classes, definitely positive. A bit of a drag on performance from private equity and public equity. And allocation effect slightly negative. And again, that was almost all driven by being slightly underweight to public equity.

Versus its target.

I want to stop there to see if we have any questions about attribution. Trustees, any questions? Proceed. The next slide, we have another one of our eye charts, periodic tables. This one's a little different in that we break this into the permanent fund performance, which is the red box, versus the asset class indices for the permanent fund.

So the various benchmarks that make up the total fund benchmark. Think of this as like a building block of all of the— building blocks for all of the underlying benchmarks in these permanent funds. Target benchmark gives you a feel for how each individual asset class has performed in all over calendar year periods versus the total fund as a whole. The good thing you see here is that red box tends to be near the top of the individual calendar years. That really is driven by having an allocation to the public equity market.

And this is one of those charts where you can see over the recent periods, 2023, 2024, 2025, public equity has been outperforming asset class, right? We see that again here in the first half of 2026. The fact that the Permanent Fund has a little less in public equity than peers is really going to be the key driver for what we're going to see on the coming supports.

So with that point, let's look at peer group comparisons starting on '18. Look at the permanent fund versus first large public funds. And what you'll see here is that the permanent fund has ranked in the bottom quartile for the last quarter fiscal year to date the last 3 years and slightly lagging its benchmark as we have discussed. Over the longer-term time periods, once you get out to 10 years and 20 years, the fund is above median and ahead of the benchmark, even with this near-term underperformance versus the index. The reason for this near-term ranking that we see, 85th percentile over the last 3 years, is because the permanent fund has a lower allocation to public equities.

It's almost entirely driven by that. There has been some underperformance from some of your asset classes, but that's really driven more in the performance versus your benchmark. You'll notice that the total funds performance benchmark over the last 3 years is also in the bottom quartile, 75th percentile, and that is because it has a lower allocation to the public equity market versus other public funds. Most public funds, as I mentioned, have about a 50% weight to the public equity market.

Slide 19 looks at the same analysis but against our large endowment and foundation peer group. Endowments and foundations, as we have discussed in the past, tend to have a closer allocation to what the permanent fund now has, but they are a bit different in that they tend to have a bit more in private markets, particularly private equity and private credit, a bit less in fixed income, usually about half of what the permanent fund had. And what we see here is a fairly similar pattern where the permanent fund ranks in the bottom quartile. Over the last 1 year, the last 3 years, a little bit higher over the longer term, over the 5, 10, and 20-year periods, it falls into the third quartile. Again, this is mostly the differential we see here is really driven by asset allocation difference.

All right. The key here is I want you to focus in on benchmark relative performance more than the peer relative performance.

Slide 20 and 21 looks at realized standard deviation. So rather than focusing in on performance, let's look at how volatile the performance pattern has been for the permanent fund relative to peers. And what we see here on 20, the standard deviation, realized standard deviation of the permanent fund has actually been quite a bit lower than its benchmark over most time periods and extremely low versus other public funds, bottom quartile over all periods. And this is absolutely related to that same factor, the fact that the permanent fund does not have as much invested in the public equity market, which tends to be more volatile than the private markets.

Slide 21 looks at the same analysis versus our large endowment and foundation peer group. Again, fairly low. Realized standard deviation compared to other large endowments and foundations. It's about median over the full 20-year period. Again, this is really driven more by the asset allocation differential between the permanent fund and the large endowment foundation peer group.

However, the permanent fund looks a bit more like an endowment foundation these days. So I would say that 20-year observation versus the— versus this peer group, is a pretty fair comparison. You'll see the permanent fund has about a median observation, slightly below median risk, realized risk compared to other large endowments and foundations.

The final two charts we have for the total fund look at Sharpe ratio. So Sharpe ratio is a measure of risk-adjusted performance. Think of it as return per unit of risk taken. So how effective is the investment team at accepting risk and earning a performance premium for the risks that are being taken. The Sharpe ratio for the permanent fund continues to be pretty strong.

So compared to large public funds, Sharpe ratio is in the 12th percentile over the last 10 years and 14th percentile over the last 20 years. So the risks that are being taken are being very well compensated. A good way to look at this analysis. Very strong Sharpe ratio versus large public funds, a fairly similar Sharpe ratio to large endowments and foundations on slide 23. So above median for all time periods, slightly below median for the 20-year period, 51st percentile.

I feel like we should give it to Greg. You can decide that one. I can think on that. So what this means is the The permanent fund is not taking outside— outsized risk relative to peers. Compared to large public funds, it's actually doing extremely well versus large endowments and foundations.

It is above median over the last 10 years and right around the median risk being taken by a large endowment foundation. I wanted to stop there to see if there are any questions about total fund performance before we talk about asset class performance.

Everybody ask a question? Yeah, go ahead, Janet. Why do you think that is? This is Janet Becker, advisor. Why do you think that the Sharpe ratio is so much better against public funds than it is against endowments?

It all comes back to that public equity side. Exactly. Yeah, the variability that you see in the public fund performance is much wider than what you see in the endowment foundation peer group. Yeah, you get a lot of reward in the dimension of Sharpe ratio for owning private markets because they've got high returns and very low observed volatility. Now, underneath the hood, if they had to value those every single day, or you had to go out and sell them or price them every day, you'd see a lot more volatility.

So it's a little bit of a—.

It's not cheating, so to speak, but in some senses, It's really going to be driven by two things: how much private markets you have and then how successful your private markets program is.

What's the difference between the private markets in public funds and the private markets in endowment foundation universes? Because that, I mean, I think that's clearly a huge difference here. You're right, because the observed volatility for private equities is low. Relative to public. And so that kind of masks the real volatility of the asset class, but it also changes the Sharpe ratios.

Yeah, so this is Greg Allen, by the way. For the endowment foundation universe, for our universe that we have here, the median allocation to private market is about 60% of the portfolio.

And it's even higher if you look at the large endowments. In our public fund database, it's probably in the range of 30 to 34%, right in there, to private markets. So it's a, it's a big delta in terms of the use of private markets by endowments versus public funds. Public funds have been growing, but permanent funds above public funds, below endowments.

Steve Center from Calumet, the Alternatives portfolio for public funds also tends to have a bit more in real estate as a percentage versus what you see in endowments and foundations. And we've all seen the volatility that's come to the real estate market over the last couple of years post-COVID with interest rates going up. As a result, the alternatives portfolio in public funds has also been more volatile than the alternatives portfolios you see in a typical endowment foundation.

Well, private equity has not performed the way we've seen the public markets perform. It hasn't had a volatile return pattern. It's been fairly steady, and that means the realized risk, realized standard deviation has not been as high as what you see in real estate, which has fluctuated pretty much.

Are there any other questions before we talk about asset class performance?

Merci. We're going to start with the equity portfolio. And I know Jim Reese talked a bit about the public equity portfolio yesterday, but let's start here on slide 25. Just a couple slides about the overall global equity market as of the end of fiscal year. Global equity and global ex-US equity, fairly strong performance.

Developed US equity markets did lag the US equity markets during the quarter. For the year, however, non-US equity markets outperformed the US. The MSCI All Country World Index was up about 14.5% during the quarter. Strong performance from Japan and the eurozone definitely led developed market performance, while the United Kingdom did lag a little bit. In the emerging markets, South Korea and Taiwan led the AI-driven semiconductor performance.

While Brazil and China lagged, particularly Brazil, Brazil had a bit of a performance drop due to persistent inflation and their upcoming election uncertainty. China had some retail and auto weakness prints and ultimately had a negative return. In that top right chart, you can see China was the only negative performer for the quarter of the ones that we are looking at.

The—. I mentioned this earlier, emerging markets, has seen an uptick in concentration. We talk a lot about the Magnificent Seven for the US stock market. In the emerging markets space, the top 5 holdings— I said 10, it's actually the top 5 holdings— make up 35% of the index. And those are almost all— I believe they are all AI semiconductor-related stocks, particularly from Taiwan and South Korea, which continue to be part of the emerging market benchmark.

Outside the US, from a growth versus value standpoint, growth reversed its lagging performance. Value has really outperformed growth outside the US for the last couple years. Growth outperformed value last quarter, and for the last year, you look at emerging markets, growth outperformed value. In the developed markets, value outperformed growth, and that is again the same semiconductor story that we talked about.

Turn. From a dollar standpoint, US dollar strengthened modestly during the quarter, and that was ultimately, ultimately a bit of a headwind for performance outside the US.

Looking at some of the factors that have contributed to global equity performance, the one factor that's really driven performance outside the US is what's called momentum. So the overall path of performance for a stock has continued to be the one of the key factor drivers of performance. This looks at manager performance in Callan's global equity peer group and breaks down how exposed these managers are to this momentum factor. 29 Managers at the end of the year with momentum exposures below the index. Only 6 of those under— outperformed the benchmark.

The 28 that had momentum exposure above the benchmark, 23 outperformed. Momentum has really been one of the key drivers of performance, and that almost entirely comes back to IT exposure, semiconductor and energy transmission, and the buildout of data centers. All of these continue to be strong performers, particularly outside the US and— Looking at the US equity space on 27, US equity performance was positive. S&P up 15.2% for the quarter. So very strong performance from the AI value chain, particularly things related to energy transmission, related to the buildout, continued buildout of data centers.

The—. This sector outperformed the Mag 7 for the quarter. As a matter of fact, the S&P 500 had 24 all-time closing highs in the first half of 2026. As we have all seen, that has reversed here in Q3. So we'll see a much different picture for September.

Large-cap returns were very broad-based for the second quarter. The Equal Weight S&P outperformed the S&P 500 for the first half of the year. Additionally, 9 of the 11 S&P sectors had positive performance. If you look at those bars at the bottom of the page, only energy and utilities were negative. Information technology was up 31.8% in Q2.

And small cap outperformed large cap. Russell 2000 was up 21.5% for the quarter. And for the last year, Russell 2000, representing the US small cap space, was up 40.8%. Speaking of small caps, on 28, are small capitalization stocks finally back in favor? We've had an extended period where large-cap stocks have outperformed small-cap stocks.

And over the last 12 months, we have seen a reversal in this. Does this mean we've entered a new phase where small-cap is— small-cap factor is again a positive performer versus large-cap stocks? So best quarter since the fourth quarter of 2020 and the eighth-best quarter for small caps since 1978. However, the small-cap performance has been driven by names that don't have earnings or have negative earnings. So you'll see the second section here, it says no earnings, no problem.

Small-cap managers, active managers, tended to underperform the benchmark, and that's because the strongest performing small-cap names have been names that have negative earnings, do not— are not currently earning positive earnings. And, uh, many of these are related to the same AI wave that we're seeing right now. As a result, most active managers have lagged the benchmark. Key way to measure this is this last point, the S&P SmallCap Index versus the Russell 2000. The S&P SmallCap Index does not hold negative earning names.

The Russell 2000 holds all small cap names that are available, the full basket. The S&P SmallCap 600 tends to outperform the Russell 2000 for that very reason. We're now in the third year where the Justice Department has outperformed the S&P 600 small-cap index. And it's all being driven by these small-cap names that are fully momentum-driven and actually have negative earnings. It's surprising and worrying.

It's a good way to put it.

So one—. Greg Allen from Cowen. Greg Allen from Cowen. One little piece of color on that, if you think about the small caps universe of stocks. A big chunk of these non-earners are part of the AI build-out chain.

They're small companies that are somehow involved in providing the pans and shovels, as a known reference, for the gold miners. And a lot of these companies are growing really fast because they've got to keep up with the demand. And so when you're in that mode, You're typically spending a lot of money on new infrastructure to grow, and you haven't realized the earnings yet. So that's the story of a lot of these stocks. You know, the market has recognized that, and they're sort of investing early and riding the momentum because everybody expects these companies to be much bigger because of the AI buildout.

So again, this AI buildout theme finds its way into emerging markets, finds its way into small cap. It's finding its way, like, you know, into the entire equity market. It's not just the big hyperscalers anymore that's driving everything. So interesting.

So Greg, that's your way of saying not to worry?

I mean, I'm just— I asked the question because what, what Steve said obviously raised some flags. You calm that down a little. I'm just wondering, from our manager and the direction Marcus and team are giving, is there direction recommendations that come from that?

Not from us. I mean, I think the managers are very aware of this. So when managers come in and talk to us, which they do all the time, this has been the driving theme of all of these discussions. And it's not even just in public equities, it's private credit, it's private equity, it's— so it's just public Public credit. Yeah, it is the gorilla that's driving returns across your entire portfolio.

So again, when you have one factor, and maybe it is the biggest factor, and maybe it's the future of the world, being overweight, that is a little bit of a speculative position, right? It's kind of like you want to ride it until you don't. And I think when you look at kind of traditional institutional active managers, they tend to be much more focused on companies with positive earnings, companies with quality. Uh, and there, there are retail strategies that are trying to chase momentum, but your typical institutional portfolio is going to be a little bit short momentum, I'd say, and long quality. And again, this is— if you meet with enough managers, they come up with the most amazing excuses as to why they've underperformed.

But this one kind of resonates, at least with me, because small cap in particular, it has not been a winning strategy over the long run to buy non-earners. So this is kind of a new thing. And so what we're seeing again is that The typical active small-cap manager has significantly underperformed the Russell 2000 because they don't own these companies.

Thank you. Steve Center from Fallon. I don't see a lot of baby faces in the room, so we all lived through the dot-com bubble. And this reminds me of the dot-com phase where we had the same factor. We had a bunch of names with negative earnings.

Everybody thought it was the future. Everybody was investing in those stocks and they don't exist now. Now these companies are all gone, right? So I personally, I'm concerned, but that's me being Chicken Little. And I'm—.

Greg has known me long enough, but I was a Bond guy for a long time. I'm all the sky is always falling and I'm always wrong. So, but, but if you don't learn from history, uh, you're bound to repeat it. And so I guess, Marcus, what, what's your thoughts on Our small-cap active managers had a really bad year last year, like hundreds of basis points of underperformance. So it's painful.

But I mean, I agree that it's a really frothy market and I think that—. I mean, I think that they'll outperform over the coming years, but I mean, it has been quite painful.

And are you saying they're— they underperformed because of this exact issue that they're staying away from? Yes, precisely. Like, I mean, the, the level of our small-cap active managers underperforming was like beyond what you normally see, which I mean, like, in the— it typically falls like 400 or 500 basis points on the— I mean, this is a small part of our equity portfolio, but it was like the epicenter of difficult performance last year. And, um, one of the things Wad does well is he has these very long-term manager relationships that our line of small-cap managers have beaten over long periods of time. And this was like by far the worst year.

Um, so I would expect it to reverse. And, um, yeah, that, that would be my take. Or, uh, conversely, if there is another 1990, uh, bubble bursting were protected. Uh, yes, that's right. Uh, Vice Chair Shutt.

Ethan Shutt on the record. Um, I've seen a number of reports lately that give me concern in the same general theme analog to the internet bubble late 2000 or late 1990s and 2000, including that many of the processing units that have been just have been reported as sold or not being installed, and that the installation rates are far lower, not just by the hyperscalers but by a number of the industry players. And it's reported. Um, what do we know about that, and how does that play into some of this?

I wish I had a good answer for that, um, Trustee Shutt. I, I do not. What I can say is there's been a just an extremely rapid period of growth and capital infusion into the entire industry from data center buildout to software construction. It's, it's hyperscaler money. Crazy.

We have some slides coming up on the fixed income side to talk about PDCs and how that space has grown. It's almost all AI related. So a great deal of debt now related to AI software, which again, lending to a software company, there's what are you going to recover if something goes under. Recover software, not really worth anything.

There's a lot of factors that are potential concerns with this period of growth. The amount of circular financing that we've seen among hyperscalers and software developers is surprising. And it feels like something is going to be the straw that breaks the candles back, and who knows what that's going to be. So we're—. I, I mean, it is very concerning.

It looks— some, some elements of this look like Enron on steroids. Not, not just one Enron, but a whole industry of Enrons. And I mean, with the off-balance sheet stuff from the circular financing and possibility that people are sort of misleading in their reporting about installation of processing units and capacity that's coming online, you know, littered through the debt markets and, and all the rest. It seems like a fairly concerning moment. I don't know, obviously, what to do about it, but, um, it is concerning.

Well, and Trustee Shedd, I would say it sounds like we are doing something about it. By underweighting those, those entities. Yeah. For the record, this is Marcus Remington again. Our fixed income team does a lot of work on this and it might be interesting to have them present something in December on it.

Like the— in their indexes, they manage money against high yield and investment grade corporates. The pay issuers have gone from like nothing to like mid-single digit percent, I believe. And it's meaningful and they have to, and they're sifting through what to buy and not buy. And like one of, one of the guys on the team, Colton, gets like Google Earth images to look at like construction progress. And like, that's an issue because they have to get built by a certain time or the hyperscaler's not on the hook.

And, uh, like Oracle is, I mean, I read these articles that it sounds like you read too, like Oracle has a big development, they declared Force Majeure on, and Blue Owl is the lender on that. I mean, I don't— it seems messy because it's a big deal and there's a lot of smaller ones. And I think in this like boom period, it's just like, who— there's no distinguishment between like who's taking smart risk or bad risk. It's like whoever took the most risk is like looking really good right now. And I, I think that, yeah, it could there'll almost certainly be a cycle even if like AI is like here to stay.

And, um, yeah, so I, I don't know, we could, we could do something in December to go through like— because they do a lot of work on, on which bonds to own and not own. We own Oracle bonds and that's been a painful, um, trade this year. Like they've widened out a lot because they're one of the most aggressive. There's I think some follow-up we can do, but we're definitely doing, I think, underexposed relative to, like, the people who'll get burned the worst. Well, yeah, I like the idea of that presentation in December.

You can just have them use AI to create it. I'm sure we'll get a different story than what's actually—. Trustee Samuels, did you have a— back to Cal.

The records. Uh, so I guess that one overarching theme— we've been talking about the underperformance of, uh, the permanent fund, you know, relative to various things. And I think in almost every case it's, it's because they're somewhat defensive relative to this. So if you think about the S&P 500, for example, If the trustee suddenly said, you should go all passive, we're going to change the investment guidelines, we don't believe in active managers anymore, Marcus would have to implement that. And you would essentially be making the decision to go into an unmanaged index.

I mean, the S&P is a little bit more managed than the Russell 3000, for example, because you need earnings. But the index is going to feel the animal spirits of the market much more intensely than an actively managed portfolio. And so I think part of the reason you're seeing underperformance in, in Permanent Funds equity portfolio is that they're taking a more reserved view. I mean, they're still participating. You can't just sit out in cash, right?

That would be a disaster. Over the long run. You never know when you get back in. But I think having active management in an environment like this, the effect that it's going to have is probably a tempering effect, and then that's going to have a positive effect if there's a reversal. So just want to put the underperformance into context.

Yeah, I just— I want to chime in on this.

This is the type of thing that is not— and this is for another discussion, but this is the type of thing that is not captured in our incentive compensation. And it is focused on capital preservation and intelligent investing instead of just trying to hit a number. And we obviously didn't hit the numbers, so the majority of staff in the Permanent Fund did not get their incentive comp this year. But that's not saying that— obviously we want them to meet the number, but they're also making decisions for which managers they're choosing from a capital preservation perspective that we should be supportive of. So as we are analyzing our full package for our employees and focusing on recruitment and retention, I think that that needs to be a component of our future decisions.

Trustee Binkley. Thank you, Mr. Chairman. In those KPIs for those bonuses, do we look at the Sharpe ratio? Because that seems to me, you know, what per unit of risk is your return? That's a key one from our perspective.

No, no, we—. Trustee Pinkley, no, we do not. We obviously established it 4 years ago, 3 or 4 years ago, but it was pretty much the 1- and the 5-year returns. And the individuals that are managing funds are managing sectors, asset classes. They— their bonus is tied to that performance as well as the full fund.

Marcus and Devin, senior leadership, are focused on just the entire fund, which we did not meet. We had a record year as far as the— but we did not meet the benchmark. So bonuses were not paid on that. And then I think Devin was telling me like 10 or 15% of employees got bonuses this year for the 50% component that was for their individual asset class. But The rest did not, and I believe all of the employees did not get it that were in the operation side because funds did not make it.

Devin, if I misspoke, please. No, you're definitely close. So while we traded a text earlier, and this is Devin Mitchell, I received word that the personnel action forms were approved by the governor's office today. For the 9 employees that are eligible for incentive comp. And so the, so the 9 employees represent 13.84, so 13.9% of total employees are going to receive, or of the 65 PCNs we have.

So I only have 60 employees, so it's a higher percentage of actual employees, but the number of employees that are budgeted is based on 13.8% of that are receiving a bonus, and the bonuses they're receiving represent 17.3% of the budget. So that's the payout this year based on performance and its absolute return in fixed income that are eligible this year as highlighted in Mark's presentation yesterday. Yeah, thanks, Devin. In fact, Chuck, we should review that, how we put that structure. Yeah, structure that.

I agree. And that's, that's part of the task— or I've tasked Devin with that. We talked about it yesterday about, you know, talk— having a survey of our staff as well, looking at the markets, looking at who our peers are, but also looking— we literally put this together 3 years ago based on recommendations that were given to us, but it's important to reevaluate and recognize, obviously, We can't give back bonuses, but we can change things for the future to make sure that we're staying competitive. And especially in instances like this where we are, we're making our, our staff are making decisions that are capital preservation focused in instances like this. So we don't repeat what happened in the late '90s or 2008 GFC or otherwise.

Devon, feel free to chime in, but my hope is this is a process that will then evolve to what we recommend for our budget for the subsequent year next summer. But I think that's going to be a process we're working on between now and then.

Any good, bad, indifferent? That's something that we can do. I mean, the incentive compensation program structure is always going to be imperfect. There's always going to be a criticism or a potential improvement that could be made to it. And, and there's good and bad things about the program we have right now.

The good is that it's easy to defend. It's not that we're deciding somebody worked hard and deserve something. We just say, well, you've hit a target or you didn't. And so that's easy to look at. But I think some of the tweaks that may be teasing out some of the Sharpe ratio tweaks that we discussed earlier, how we are benefiting from the risk that we're taking, is a component that would be less subjective and it's more measurable.

And so that could be something that I maybe would try to glom onto from this discussion that just happened. But when it comes down to, oh, you know, Employee X tried hard and Employee Y didn't try hard in my subjective view, that becomes more difficult. Agreed. Agreed. Thank you.

Steve, back to you. Great.

So now I'm down to under an hour already and I have like 50 more slides. So I'm going to have to skip a couple as I go, but I promise I will touch on the important ones. Let's start talking about asset class performance. So slides 29 and 30 look at the permanent funds equity portfolio on the far right of each period, that's the red bar, versus various areas of the public equity market. Just to kind of get you— give a feel for what the drivers were for performance over the last calendar quarter, year, 3-year, and longer term on the next slide.

What you can see here is the permanent funds equity portfolio returned 14.5% last quarter, 23.9% over the last year, and 18.5% over the last 3 years. Key performer in the public equity market has been the emerging market equity space. Which was up 24% last quarter, 43.5% over the last year, and 23% over the last 3 years. When we get out to longer-term periods on 30, US large-cap growth has been the strongest performer, which was up almost 19% over the last 7 and 10 years and 13.6% over the last 20 years. The Permanent Funds Equity portfolio has been very positive.

Up 13.3% over the last 7 years and 12.8% over the last 10 years. Slide 31 is another one of our periodic tables. Again, the permanent fund is the red box, and this shows the permanent fund's performance versus the various parts of the public equity market. These are the same benchmarks we had in those previous slides, but looks at things on a calendar basis just to really focus in on what have been the key drivers of performance. Again, you'll notice that orange box, which is US large-cap growth, for most of the tail end of the 2010s really has been the strongest performer, and here in the early 2020s.

The near term though, emerging markets have really been key drivers of performance, up 33.6% last year and 23.9% so far in the first half of 2026. So let's look at the performance of the Permanent Fund's public equity portfolio versus other large other fund sponsors' public equity programs. So in this case, we are comparing the permanent fund's public equity portfolio against other large institutional investors' public equity portfolios. I want you to focus in on, on this because we've talked a bit about how the public equity program has underperformed its benchmark, the MSCI All Country World Index. Despite that underperformance, the public equity portfolio is a median performer over the last 3 years, 49th percentile.

With an 18.5% return. The benchmark itself is near the top quartile, 27th percentile. What that means is almost a little more than 70% of public— 70% of institutional investors, their public equity programs have underperformed this index. It is difficult to keep pace with the MSCI All Country World Index, mostly because of the concentration that we've seen in the benchmark, both in the US and outside the US.

As a follow-up to that, that would mean any of those entities— and Trustee Binkley, I'm just following up on the previous conversation. I don't know if you said 70%, um, that would mean if those entities had incentive comp packages similar to ours, 70% weren't getting paid. On the equity piece. I get it. So I'm just— I think it would be good to see what the trend was for those entities, Devin, like if they're reevaluating or if just as we're doing our comparisons across peer groups for— go ahead, Marcus.

Yeah, just to comment quickly. This is Marcus. Yeah, we looked at all these peer incentive comp plans. 7 Years ago and 3 years ago. And ours, I mean, and we were aware of it at the time and the decision was made, ours is unique on being like narrowly on, on performance.

Like the, the common— I mean, lots of these plans won't, don't have incentive comp plans. Like I think if you look at like state pension funds, a majority don't have incentive comp plans. Um, but of the ones that do, it's— oh, I don't think there's any that are just performance benchmarks. Like, the common one is a qualitative aspect. And I think there was a desire not to do that for a bunch of reasons.

But you see that— I mean, we— I should look again because it's been a few years, but I know ours is definitely unique on just one narrow measurement on performance. Okay. But— and we'll look again. Yeah. Thank you.

And Callan, I'm sorry for Degracing there, but it was appropriate at the time. I just want you to focus in on the longer-term performance as well. If you look at the 7 and 10-year periods, the public equity portfolio has outperformed the benchmark and ranks fairly well versus this peer group, in 32nd percentile for 7 years and the 38th percentile over the 10-year period. So outperforming a good portion of institutional public equity programs.

Slide 33 is simply a snapshot of the public equity portfolio just to help you right-size the various 3 buckets that we look at. Domestic equity makes up about 35% of the portfolio, global equity about 40%, and international equity about 22% of the overall portfolio.

So let's look at some of these underlying asset classes, portions of the public equity asset class, domestic equity. This area of the public equity portfolio has struggled, and that this is for a couple of factors. First being exposure to small caps. Small caps have done very well, but the active small cap managers have lagged from a performance standpoint. Value has done very well in the near term.

One of the reasons why for the last But the year-to-date, you see fairly strong performance versus peers and versus the benchmark, outperforming the benchmark by about 1.7%. But over the longer term, being overweight value versus growth has been a headwind to your average performance. So the US equity portfolio, you can see here, has lagged its benchmark for all periods 1 year and longer and is below median for all periods 1 year and longer as well. That really is driven by that capitalization bias and the value, uh, overweight.

Outside of the US, things look a bit better. So global equity on page 35. Global equity performance has been well above median over all time periods and top quartile for the trailing 3, 5, and 7 years. Ahead of the benchmark over the long term as well. It's been a very strong contributor for the overall performance of the public equity program, even though global equity performance has lagged US-only mandates over the long term.

Similarly, outside the US, on slide 36, this is your, the non-US or international equity components. So these are both developed and emerging market strategies. This, the non-US portfolio is ahead of the benchmark over all time periods. Top decile over the long term as well. Very strong relative performance versus peers and the benchmark.

Though, as I mentioned, the US equity market has really outperformed the non-US equity market over the long term. Overall, if you look at that 10-year period, for example, the median performer for non-US equity portfolios is about 10%. The median US equity strategy is about 14%.

I'm sorry for my confusion here. All 3 performance comparisons show us above the median. One, it doesn't. Oh, for the long term? No, like I'm looking at year to date on international.

For year to date?

Yeah. So all 3 of them are above median for the year-to-date. And yet we're—. We don't have year-to-date for the public equity program as a whole on slide 32. So Fred, I can pull it up though.

Back to slide 33, the weight that we put in, there is a benchmark for what the bench— what we're supposed to have allocated to domestic, global, and international. How are we? Slightly overweight to non-US equity, I would think. It's pretty close at this point. The MSCI ACWI ex-US— MSCI ACWI benchmark is probably like 65% US, Greg?

I think it's a little less, like 62% or something like that. You guys are in the 30th percent. Sorry, Greg Allen, for the record. The public equity as a whole is in the 30th percentile year to date. So you have outperformed in each— the median, you've outperformed the median year to date in each bucket and overall.

But you've underperformed the benchmark. Right. Yeah. Right. Thank you.

I want to stop there and see if we have any questions about the public equity performance. We have a couple more slides on it, but I think we should skip them in the interest of time and talk about some other aspects of the process. So are there any questions about public equity? I don't see any. I do want to just make sure if Trustee Earls has any questions.

She let me know she's stepping away for a moment, but she'll be back online. She's just still there. Yeah, understood. Proceed. Thank you, Mr.

Chair. Let's talk about fixed income performance. You heard a bit about this from Jim yesterday as well, but we have a couple slides about the market to touch on very quickly. Slide 41, U.S. fixed income performance was positive for the quarter. We've got a new Fed chair.

Kevin Walsh is the new Fed chair, and President Trump was happy to put him there, tried to give him a mandate to lower interest rates, but that's not how it was. The Fed the Federal Open Market Committee is to vote. And as we all saw earlier in— oh, it's not September anymore now that it's October 1st. Last month, interest rates did go up and it was a unanimous vote. So clearly the Fed is still concerned about inflation, persistent inflation, and the, the arrow they have in their quiver is to raise interest rates.

And so here we are with interest rates going up another 25 basis points. As of the end of June though, interest rates were pretty stable. The fixed income market was honestly pretty boring in Q2. It ticked along positive. The aggregate was up about 70 basis points.

Investment-grade corporates outpaced treasuries from a performance standpoint. We saw spreads continue to tighten. Volatility that upticked slightly at the beginning of the quarter faded. There's just continued demand for yield, and as a result, new issues are very well oversubscribed. Yield continues to be the key driver of performance, at least until Q3, and we've, where we've seen some volatility return to the fixed income market.

So I'm curious to see how this is going to look next quarter.

Outside the US, things have continued to be pretty stable as well. So the Bank of England held rates steady, steady in April and June, but the European Central Bank did get a bit more proactive and raised rates in June. Overall, the US dollar— I mentioned the US dollar strengthening a bit when I talked about non-US stocks. The strengthening dollar led to hedged non-US bond portfolios outperforming. And emerging market debt continues to do extremely well.

The JPMorgan EMBI Global Diversified up 6.7% over the last year, outperforming all of the US bond indices as a whole. This is after an extended period of very poor performance for emerging market bonds. So it's good to see some positive numbers there.

Couple themes from the fixed income space. I won't belabor these, but I talked a bit about on slide 43 earlier on what are called BDCs, business development companies. BDCs are publicly traded investment companies that lend primarily to middle market companies, and then they can issue— BDCs can issue stocks and debt. And the debt from BDCs are publicly traded, and they can also be included in the benchmark. So at this point, the Bloomberg Aggregate does hold some BDC debt.

As of June 2026, there were 121 BDC debt issues from 30 issuers in the Bloomberg Aggregate. They tend to be just barely investment grade, so BBB to BBB-. And they have really come under pressure even here at the beginning in June where there's been a lot of retail redemption requests for these bonds. Spreads have widened out a bit and they could be, I hate to say canary in the coal mine, but it's one of those things you definitely want to keep an eye on. Most of the loans coming from these BDCs tend to be related to the AI buildup.

So this is where you might see it in the investment grade corporate debt space and particularly even in the Bloomberg On that same trend on 44, this looks at the AI appetite for debt as it relates to hyperscalers. Amazon, for example, Amazon, Google, Microsoft, and Oracle. These are the spreads for individual bonds. So not the spreads for all of their debt, but I want to mention here that CIO Brampton mentioned Oracle being one of those that's been having some issues. That black line is is Oracle, and it, as you can see in June and July of '26, it spread widened pretty dramatically.

That red line is the overall corporate index. So the corporate index has been fairly tight from a spread standpoint, but all these hyperscalers have begun to come under a little bit of pressure. Some of these are companies that historically have not issued a lot of debt. So, you know, Google's issued debt, Microsoft for a long time didn't issue any debt, We see the same thing from Apple. Some of these things, these companies are simply coming to market to raise capital because there's such an appetite for yield.

And question is, how well is this capital ultimately being invested? And how much of a guarantee do you have that these bonds are ultimately going to be running good? So there's definitely some concerns as it relates to the debt from these hyperscalers.

Let's skip ahead to performance on the fixed income side on 46. Public fixed income performance similar to what we saw on the equity slides. The APFC performance is at the far right each time period, 1.3% last quarter, 4.2% for the last year, and 5.3% over the trailing 3 years. Key drivers of the bond market performance bond market performance has really come from high yield and credit. So high yield up almost 6% over the last year, 8.8% over the last 3 years.

Additionally, long treasuries have done fairly well, but the other strong asset class over the last 3 years, long treasuries have done pretty darn well. That means exposure to duration has been positive. TIPS have also done pretty well, up 4% over the last 3 years. And that's important because the permanent fund does have a dedicated allocation to TIPS.

Looking at longer term on 47, again, high yield really has been the key driver of performance. You can see long Treasuries just getting hammered over the last 5 years, and that's because that's where you see that increase in interest rates that came post-COVID. And when interest rates go up, bond prices go down, and long Treasuries are really where you feel that. Longer-term performance for the bond portfolio, up 5.3% over the last 3 years, 1.1% over the last 5 years, and 2.6% over the last 10 years, outperforming most of the individual building blocks. If you look at that 10-year period at 2.6%, fairly strong performance for the overall fixed income portfolio.

And you can really see that on 49— let's flip ahead to 49.

49. The fixed income portfolio is ahead of its benchmark over all time periods and below median only over the last year, since it's 5th percentile versus other institutional fund sponsor fixed income programs. Over the trailing 5 years, ahead of the benchmark by 40 basis points, by 50 basis points over 7 years, and 60 basis points over the last 10 years. In the 34th percentile over the last 10 years. Very strong performance for your fixed income portfolio, particularly given that it is managed 100% internally by your fixed income team.

Slide 50 looks at the overall structure of the fixed income portfolio. Almost 60% of the portfolio is invested in the Aggregate Program and the U.S. Investment Grade Corporate Program. Remaining building blocks are— think of these as some of the plus sectors. So non-US fixed income, TIPS, high yield, structured products, and cash. TIPS allocation is pretty unique.

Most institutional investors don't always have a dedicated allocation to TIPS, but given the inflation portion of your return target, the CPI+5 return target, an allocation to TIPS for some inflation hedging is not a bad thing to do. Plus the TIPS program has done fairly well as it is managed internally. But the key thing to take away from here is that the largest portions of this portfolio are that US aggregate and investment-grade corporate portfolio.

Jim also touched a bit on this yesterday, but the overall performance for the various pieces of the fixed income portfolio have been extremely strong. The green or yellowish highlighted cells doesn't come out great on the, on the screen represent time periods where that portfolio has outperformed its benchmark. And you can see that over 90% of the time periods, you see outperformance from, from those portfolios. US Aggregate and the Investment Grade Corporate portfolios have both done very well versus their benchmarks. The only core program that's underperformed has been the Structured Product portfolio, and it's been benchmark-like over the last over the full time period that's been around, just slightly lagging the index over the trailing 5-year period.

This program continues to do extremely well. One of those ones that I don't think we need to talk that much about. Good performance. Good. Trustee Samuels.

Thank you, Mr. Chairman. For your other clients, it seems like we got a little bit of a mixed bag, and this is a home run over the long term or the short term or the medium term, everything. Do your other clients find the same thing with fixed income, or are we just so good that—. Fixed income is an asset class where active management tends to outperform the benchmark. The benchmark tends to be fairly easy to outperform.

And when I say the benchmark, I mean the Bloomberg Aggregate Index. Your benchmark is actually an amalgamation of all of the underlying building blocks. So it looks a lot more like your portfolio. And your portfolio continues to outperform. So what I would say is it's not uncommon to see outperformance versus the benchmark as a whole in a fixed income program, but some programs are implemented with much more risk than your program is, particularly relative to the benchmark.

I'm answering like a consultant here. Follow-up, Jose, say one sec. I'm going to chime in, Greg Allen here, because I actually do think the performance of this fixed income portfolio, as I've observed it, is, is fairly unique. Um, I've always thought fixed income— the narrative that, that active management in fixed income can beat the benchmark is a little bit convenient because most active managers just take a lot of credit risk relative to benchmark. Benchmark is full of treasuries now.

And what, 60% Treasuries or something like more? So 99 times, 9 times out of 10 anyway, taking credit risk pays off. So it's kind of an easy bet, but in some senses, and so everybody does it. And so to say that active management beats the benchmark basically is saying that active managers take credit risk over the benchmark. And so the distinction with your portfolio is that Jim, and his team are highly structured and focused on beating the benchmark with the same level of credit risk.

Okay, so they're doing it the old-fashioned way. They're picking good stocks. They're making a nickel here, a dime here, a nickel here, dime here. And so the performance pattern you see is even in periods where credit spreads narrow— widen, in other words, taking risk is not rewarded, They've outperformed in periods like that. So in terms of like a batting average, which is sort of like how often do you at least get on base, uh, this portfolio I think is unique.

We had a metric that looked at percentage of quarters outperformed, or, um, you know, there are a few strategies out there that do this, uh, as well. They tend to be viewed by the marketplace though as being, uh, boring, you know, uh, because they're not taking the credit risk, and so they're not winning big when credit pays. So it is a very risk-controlled program with an extremely high batting average. And so I think that's pretty good. I mean, you could instruct Jim to take more credit risk by changing the benchmark.

He would do that. But I think he's just the kind of guy that seems to me that he just wants to beat the benchmark and doesn't believe that doing that by taking a bunch of extra risk is the right way to do it. Does that make sense?

Yeah, the one thing I would add to that is you can see on, uh, here on slide 51, if you look at the top row, the, the, the Bloomberg aggregate return over the last 10 years is 1.54%. Your benchmark return at the bottom row here is 2.04%. And your portfolio has returned 2.6%, I'm not going to say all, but I would say most institutional investors use the Bloomberg Aggregate as their bond portfolio benchmark. Do you agree with that, Greg? Greg's shaking his head yes for the record.

If you use the aggregate as your benchmark, 1.5%, you're outperforming by 1.1%. It's a substantial return. But rather than going that route, The way Jim and his team structure the portfolio is using this building block approach where they are actively managing each of these individual building blocks versus the benchmark in a very risk-controlled manner. And they have done so extremely effectively and have resulted in a— it's resulted in a program that is adding quite a bit of a premium relative to what most use as their benchmark. So very strong program.

Let's talk about the alternative asset classes. So private equity, just as a reminder, the private equity asset class, much like real estate and private income, is reported on a 1-quarter lag. Private equity has been an interesting asset class. We haven't seen the same sort of performance that we've seen from the public equity markets. You can see on Slide 53 in the top right, we compare the Cambridge Private Equity Benchmark versus the Russell 3000 public market equivalent benchmark.

And you really have to get out to long periods before you see a return premium. 10 Years and 20 years, private equity does outperform that public market equivalent benchmark. In the near term though, because of this run-up we've seen in the public equity space, private equity has lagged. But we have seen some fairly strong recent performance, particularly from venture capital. Venture capital has had quite a bit of recovery in the tail end of 2025 and here in the first half of 2026, up 4.7% for the quarter and 23.3% over the trailing year.

This is led by some mega rounds of raising— of asset raising by OpenAI, Anthropic, and xAI. We have, however, seen some declining valuations of mature software companies and some macroeconomic headwinds impacting the overall private equity market. Growth equity and buyouts were both negative for the quarter. Over the long term, venture capital's rebound has pulled its 3-year return up ahead of buyouts and growth equity. So venture capital, which traditionally has been one of the stronger performers, now looks to be a leader over the last 3 years.

Other trends we've seen in the private equity market on 54, we continue to see a slow fundraising market. So fundraising slowed down in 2025 versus 2024. It looks like 2026 is going to be about what we saw in 2025, which is quite a bit lower than what we had in those boom years of '21 and 2022. Additionally, the number of funds being raised continues to drop. So what this means is we're seeing fewer funds but larger funds that are being raised.

So some of these funds just ultimately being— ultimately are very, very large. Fundraising typically tracks the deal and exit activity as well. We've seen exits continue to be challenged. Finally, we have seen some IPOs come to market. We've seen chatter about additional IPOs coming to market.

But it has really been a slow period for deal activity. So that chart in the bottom right shows you that first half of '26 deal activity's really been mixed across both venture and buyout, but things seem to be on pace with 2025 at this point. Venture has been accelerating relative to buyout so far in the first half of '26.

Trustee Shen. I have a—. Question about the trend of fund size going up. These larger funds, are they just doing more deals in the same fund, or are they doing larger deals in order to deploy the larger amount of capital in a single fund?

Can I phone a friend and have Alan come up here and talk about that?

Hi, Alan Waldrop, uh, for the record. Um, it's a combination of both. So some in, in different parts of the market. So in buyout, you're seeing larger deals get done. You're also seeing people doing more deals.

Um, in venture, there's been an explosion in fund size because the rounds of some of these companies are getting so large. So some of these companies are raising $1 billion at a time, $5 billion at a time. And so for the venture funds to participate and have a meaningful position, they've grown their fund sizes significantly. And so we, we tend to operate more in the what's called the middle market and lower middle market. We don't tend to do some of the very largest funds, sort of north $20 billion on the buyout side.

And then on the venture side, things that are sort of greater than $3 to $5 billion, we tend to be much sort of below that. Follow? That's very helpful. Thank you.

Thanks, Hope.

On slide 55, continuing to, one more private equity trend, and this relates to the AI boom that continues to come along. So as Alan just mentioned, some of the— particularly the venture deals are just very, very large, and that has resulted in extremely large deals. A good example of this, if you look at the bottom on the left side of this page, there's been very large rounds for OpenAI, Anthropic, and xAI. Those are about 86% of venture growth dollars in the first half of '26 have been AI related. So we've also seen trends up in, it's labeled here in energy in the top right-hand, and this is really more related to energy feeding into data centers, right?

So when you hear energy investments, people will think it could be related to oil and gas, and it's really not. It's more transmission related to data centers. However, that uncertainty around the future of software and disrupt— software disruption has led to some buyout activity slowing down. So buyout deals have slowed down here in the middle half of '26, and we see that trend continuing into the second half of '26.

Additionally, we saw SpaceX have its IPO. There's been chatter around OpenAI and Anthropic having IPOs as well. Looks like Anthropic is likely to come to the market. OpenAI has kind of backed away or been a little bit more quiet. There could be some additional IPOs later this year, and those are going to be pretty large deals when they do come to market.

Steve, and this may be a question for Alan or Marcus, most of your emphasis on PE has been on AI. That space obviously is not just AI. What portion of our PE portfolio is focused on AI versus other space? And I would lump in, given what Steve just said, the energy component, which I know we're focused on as a component for AI as opposed to other energy deals. Alan Waldrop again, for the record.

So AI is pervasive throughout our entire portfolio. There's models, there's companies making models, there's companies making tools that can apply the models, and then there's companies using the different models and tools to make their— improve their supply chain or their production process or sales force effectiveness and all that. So it's It's pervasive throughout the portfolio. So in terms of what we're doing, I mean, we tend to back managers that have skills in those areas, groups like Sequoia or Index or Mayfield, those are— and Lightspeed. Those are some of our largest venture relationships and they tend to be more out on the models and tools area.

But then our other managers, whether they're growth or buyout or they're using those available tools and models to make the companies in their portfolios better. So we're getting sort of indirect exposure there. We haven't, we haven't necessarily focused on any AI-only funds. Certain of our managers, like some of the ones I mentioned, have very deep skill sets and are well into that. And so we've got that exposure.

We did make a direct investment into Anthropic. Hopefully they continue on their path and that becomes very successful. And so that's probably the most direct exposure we have. But the rest of it is just sort of through the different managers and their skill sets, but we haven't sort of attacked it directly. We also have a lot in— I mean, the other way we're playing it, which is even more indirect, is through power, whether that's all the way back to the demand for gas, So we've done a lot in upstream oil and gas, power generation and transmission, and things like that.

And so it goes all the way back, and that feeds into the data center builds and the demand required to run those data centers and all that kind of stuff.

I appreciate the answer, and I recognize that it's pervasive across the PE space, but I'm wondering still the majority, I think, like, there's a lot of other companies that are in the PE space that I know they're using it, but I'm still trying to understand of our managers. And the reason I ask this is because what Steve said earlier about A lot of the, uh, companies that are doing well that are publicly traded are not necessarily making money, but they're— the enthusiasm for the space is causing those valuations from a public perception to go up, and I'm wondering if that is possibly similar for the PE space for the valuation of these entities if we're pervasive in the AI space with our investment, if that makes any sense. Yeah, I think I know what you're asking. So I'd say if you looked at the buyout portion of our portfolio, which is like 55% of our exposure, that's not really been an issue. The valuations, the excitement over AI hasn't really driven valuations there.

In fact, it's probably hit them because that's where the more mature software businesses sit. And so those valuations have come down as people have thought about whether those businesses can continue to generate the margins that they can with all these other tools. And so that part, I'd say there's not much exposure. Energy is another 5 or 6%. There's not been that sort of excitement there.

So that's roughly 60% of our portfolio. And then venture is probably, I think, about 30%. And that's a mix of everything from AI sort of tools and software to biotech to other types of things. And so there is some of that in there. I mean, the, the, the valuations of SpaceX, OpenAI, and Anthropic.

We've got exposure to all those directly or indirectly through managers on our portfolio. So that's driven a lot of the venture return. And so I'd say more of the venture return is exposed to that type of stuff and less realizations coming out. So more of the venture returns you see, I think, in their numbers and everybody else's is unrealized. There's been a lot of excitement, a lot of value valuation increases, but not a lot of returns coming back in.

Buyout, um, energy, growth— there's been actually a lot more exits. And, and so I do think there is the potential that venture returns will come down. Um, I mean, you saw when SpaceX went public, the share price ran up very high and then it came back down. So there's just volatility in there as, as things go public. Yeah, I want to be very clear that I am not showing my cards by implying to stay away from AI.

I'm fully—. So I'm just trying to understand how we're in that space. Yeah. And I think to the point that you were talking about earlier with— in around IncentComm, we're trying to get exposure but do it in a way that we don't get blown up. And so like our investment in Anthropic was sized in a way that If it works, it's great for the fund, but if it doesn't, it doesn't blow a hole in us.

We're just not willing. We just don't know what's coming next. And I think if people are honest, there's no way to know what's coming next with AI. And so we try and get exposure to things, but make sure we're doing it in a way that's balanced and reasonable. And that's going to cause us to miss out on some great things, but hopefully it also causes us to not get blown up if things turn.

One of their new models that were not released this week because of their safety concerns. So that's— thank you. I appreciate your answers. Questions, trustees? Continue.

Thank you.

Mr. Chair, Steve Leonard from Fallon for the record. Let's talk about performance for the private equity portfolio on 56. We've talked about how the private equity performance from a relative benchmark relative standpoint has been a drag on performance when we looked at attribution earlier. I want you to look at the private equity performance versus other private equity programs of institutional investors, and that's what you're looking at here on 56.

The private equity portfolio over the last fiscal year was up 10.45%, slightly behind its benchmark, but it ranked in the top quartile versus other private equity programs. Over the last 3 years, the private equity portfolio lagged Benchmark by almost 2%, but was above median. So this is just a good snapshot of how volatile this space can be and how the top performer and the bottom performer differ pretty substantially. So just how important it is that you, uh, when you have a program, a private equity program, the, uh, manager selection is important, deal selection is very important, because you get some of those wrong and much like Alan just said, it'll blow a hole in the side of the boat. This program has done very well from a peer-relative standpoint.

So when you look out over 7 years and 10 years, benchmark-like over 7 years, ahead of the benchmark by 1.5% over 10 years, well above median, 34th percentile over 7 years, 15th percentile over 10 years. So long-term performance of this program has been very strong and additive to the permanent fund performance over the long term. So I want to jump in on this just a little bit because this is actually a pretty new thing that we're comparing the portfolio to. I see Marcus kind of looking at it and maybe wondering what the heck's going on, but I said this to Marcus. Uh, so oftentimes when we compare, um, uh, things to universes especially in private market space, we make these universes like all of the funds that are available out there equally weighted.

And what that doesn't capture about a program like a private equity program is, you know, when you invest it, what vintage years are in there, how diversified were you? It's just literally the universes are just made up of the entire opportunity set, sort of like an index, stock index. What this represents is a bunch of client portfolios. So it's got the good, the bad, and the ugly all built in because clients do make mistakes. They start, they stop, they don't allocate in certain years, they're overallocated to certain vintages.

And so a big, huge percentage of how you do in your program is not just driven by the underlying funds, but also the way you implement it in the program. And so You can see here that over the 10-year period, which is the longest period we really have good data on enough fund, enough clients, Permanent Fund's 15th percentile. So I think that is somewhat of a reflection of the fact that you guys got in early, you have a big, well-diversified program, you've committed year after year after year so you don't have real vintage year. There are some weird things in the Permanent Fund portfolio. There's some really big deals that were done under a different CIO that you kind of had to create a little hangover in some cases.

So it's not like it's perfect, but I think part of that 15th percentile ranking is execution on the part of the permanent fund team over a decade. It's not just the performance of the underlying manager. So I think this is actually a better metric than comparing it to the entire Cambridge universe of every single fund, because a lot of those funds are small and people don't own them. So anyway, that's new. We're going to show it every quarter.

But I think it gives a really good perspective on sort of everything that goes into a private equity portfolio, not just like what the private equity universe looks like.

And just to add to that, we have similar comparisons for real estate, for the fixed income portfolio, for that public equity portfolio, for the private debt portfolio. So looking at the permanent fund versus peers rather than a manager peer.

Unless there's any questions about private equity, in the interest of time, I think we should skip ahead to real estate.

Seeing none, let's look at slide 60, talk about some of the trends in the real estate market. So in real estate, sector appreciation continues to be relatively flat. There have been some bright spots. Industrial, retail had a bit of appreciation last quarter. Income has really been what's driving performance though.

Office continues to struggle. We've seen office values continue to dip down, down about 70 basis points during the quarter. Some of the quote-unquote plus sectors in fixed income, so more of the esoteric areas, things like senior housing, things like student housing, self-storage, cold storage, manufactured housing, they've actually done extremely well. But we have seen some stability come into the real estate market. Interest rate stability tends to help.

Yes, it costs more to borrow, but the current borrowing rates tend to be pretty level, and this has resulted in a return to liquidity in the real estate market and a return to a bit of normalcy. Things are still dominated by the various coasts. So East and West Coast dominant from a size standpoint. From a performance standpoint, again, we've seen strength, some areas of strength. Office continues to struggle.

Bit, but the, uh, NCREIF Odyssey benchmark, which is an amalgamation of, uh, open-ended core real estate funds, is up about 1.5% last quarter and 4.5% for the year. The NCREIF Property Index, which is an index made up of individual properties, up 1.3% last quarter and 5% over the trailing year.

Looking at some of the trends in the Odyssey space on 61, again, this is the Odyssey is the benchmark made up of open-end core real estate funds. We've seen those funds alter their overall asset allocation in over the last 3 years post-COVID, past 5 years really. Uh, downtick in office and uptick in, uh, what's called other here. And those are things like self-storage, cold storage, senior housing, student housing, medical office, more specialty areas. And, uh, Also an increase in industrial.

So a big uptick in, in particular things related to shipping and storage and to a degree information data centers are included in some of the other sectors here as well.

So flip ahead to 63. Another trend impacting the real estate markets, pricing and transaction volumes have begun to increase. So you can see here in '25 and '26 that Number of property sales have recovered a bit from the lows we saw in post-COVID, not quite back up to the highs we saw in 2020 or back in 2017, but the number of properties transacting have actually stabilized quite a bit. Overall valuations have also stabilized. The orange line represents the value of property sold, that uses the left-hand side of the axis.

So a bit of stability coming to the market, a return to liquidity. And what this means is most of the open-end real estate funds have seen their exit queues come down because they've been able to sell some properties and fund redemption requests. We've also seen some investors that had entered exit queues back post-COVID actually pull their exit, their, redemption requests from the line because they no longer need to redeem from their real estate portfolios. They're back close to their target asset allocation. The other factor that has continued to impact the real estate markets is lending related to real estate.

So the real estate portfolio of the Permanent Fund has a real estate debt portion. Real estate debt continues to be a fairly strong performer. There's been a lot of demand for lending related to real estate properties, and that's because banks really exited the space of up a bit. That chart at the top left, you see an uptick in the second half of '25 and here into 2026. Banks have begun to lend related to commercial real estate again, and that is really because they can make a yield on it again.

So they've gone back out in the market and started doing underwriting and started lending related to real estate properties, but still not to the degree we saw pre-COVID, not even half of what we saw pre-COVID. That being said, there's a lot of need for capital. That chart in the top right shows loan maturities by sector, and there is a continued wave of loan maturities related to real estate properties. Owners are going to have to refinance their properties, and that refinancing will continue to happen at higher rates than what they have paid, what their current loans are.

Looking at performance of the real estate portfolio on 65, again, this is versus other real estate programs of institutional investors. Last quarter, the real estate program did lag its benchmark by about 1.2% and lagged the benchmark by about 2.5% last year in the bottom quartile versus peers. Despite that near-term performance, if you look out over the trailing 5 years, 7 years, 10 years, near median over 10 years, just under median over 7 years, actually top quartile over the trailing 5 years. So the real estate program has underperformed its benchmark, but relative to peers, it is not an outlier. So in the near term, yes, it's near the bottom of the distribution.

Despite that near-term performance, longer-term performance looks very much like the peer group.

Looking at the performance of the individual real estate sleeves on 67, the real estate equity program for the quarter lagged its benchmark by about 80 basis points. Over the trailing 3 years is behind the index by about 140 basis points. Real estate debt has been a bright spot. Positive 8.2% return over the last year and a positive 9.9% return over the last 5 years. The REIT portfolio has lagged the REIT benchmark over the trailing 1 quarter, 1 year, and 3 years but is ahead of the benchmark over the trailing 5, 7, and 10-year periods.

Overall, the real estate program has lagged its benchmark over all time periods shown, but as mentioned on the previous slides, versus peers, it is pretty much on the median over the long term.

Looking at the private income portfolio, so private income includes both infrastructure and private credit. Talk a bit about some trends on the infrastructure side. It's been increased deal volume, and that deal volume has been varied across investment type on the infrastructure space. Scaling of the infrastructure transaction market has been a significant growth in demand for data and power. Again, this is related to AI.

Those have both been two of the strongest performers on the infrastructure side, but it has been pretty diversified. So if we flip ahead to '70, you can see some of the performance of various areas in the infrastructure space. Power and digital infrastructure on the far left of the chart, very strong performance, strong double-digit performance. But all areas of infrastructure have done pretty well. So airports continue to be positive, Transportation continues to be positive.

Renewable energy also up about 7.8% over the last 3 years. So pretty diversified positive performance across the infrastructure space. There are, do continue to be some headwinds and tailwinds as it comes to infrastructure investing. Most of the tailwinds are things you can imagine, continued digitization, energy transition, supply chain changes, and overall aging infrastructure. But there's a lot of questions that need to be— continue to be monitored.

So things related to geopolitical tensions and recessions, interest rates and inflation, all of which can result in challenges for infrastructure investing.

On the private credit side, there continues to be pretty strong demand for debt on private credit, on the private credit space, most of it related to direct lending and senior debt. Overall performance from the private credit market has outpaced bank loans and corporate public traded corporate bonds. So the chart at the top of this page, the dark blue bar is the private credit return for Cambridge. The teal, let's go with teal, teal is the leveraged loan benchmark and the light blue bar is the Bloomberg US corporate high yield benchmark. So private credit continues to earn an excess spread relative to publicly traded bonds, which is what you would expect for taking on that additional equity risk.

Overall performance over the last 10 years, total private credit up about 9%. So overall, very strong performance relative to the public credit markets.

And where is this lending happening? On 73% Fundraising landscape continues to be fairly strong, but also pretty concentrated. So much like we've seen in the private equity space, the number of funds being raised has come down. The size of those funds has gone up. So bigger funds being raised, more capital being directed towards individual strategies.

There's been a lot of demand in Europe. So in the top right, you can see the largest funds closed in the first quarter of '26. 2 Of those are related to European direct lending. There's also been an uptick in secondaries lending. Fundraising has slowed sharply in the second quarter, so it'll be interesting to see what will happen here in the second half of '26.

There's a lot of chatter and institutional interest, continues to be institutional interest. However, the question's really going to be how much of that capital gets deployed once funds are raised.

Let's look at performance on 75. So this is for the total private income portfolio. So this is both infrastructure and private credit. The permanent funds portfolio lagged the benchmark for the trailing year and trailing 3 years, slightly ahead of the benchmark over the trailing 7 years. This is another peer group that is admittedly very thin.

We don't have a lot of observations in it, but it really shows you that variance of performance. Look at the size of that 3-year bar. It goes from positive 20% to negative 12.8%. There's a lot of tail risk in this space, right? You want to make sure you get things right.

You want to make sure your portfolio is structured defensively. This program is right on the median pretty much for the last 3 years. So slightly below the median, 8.2% versus 8.35%, but top quartile over the trailing 5 and 20-year periods. Birdsong. Okay, let's, uh, flip ahead.

We've got 2 and a half minutes left based on my timer. Hedge funds. So this is your, uh, absolute return portfolio. The absolute return space, hedge fund space last quarter was really driven by anything that had equity market beta. So, uh, equity long-short strategies were very strong performers.

Uh, event-driven also did extremely well because of the uptick in M&A activity. Relative value strategies were positive, particularly because stable— interest rates were stable during Q2. Macro strategies were the lowest performers, still positive, but up about 1.3% last quarter. Fund-to-funds continue to perform fairly well. The more strategic ones that have more equity market data did extremely well last quarter and over the last year.

Anytime you see the equity market perform as strongly as we have seen, those that are long-short or have a higher level of equity market beta tend to do extremely well.

So let's look at your portfolio's performance on 81. As a reminder, the absolute return portfolio is structured to have a lower degree of equity market beta. It is benchmarked to a blend of two of the, uh, HFRI benchmarks, so the equity market neutral and the macro Macro benchmark. Last quarter it outperformed that index by 1.5% and over the trailing 3 years by 2.7%. 10 Years, the absolute return program has outperformed its benchmark by 1.6% and has ranked in the 27th percentile versus peers.

Overall, this program has done extremely well on a benchmark relative basis, has done extremely well versus peers over the long term as well. Well above median.

I want to stop there for any questions. I know that we mentioned— it was mentioned yesterday— the CALN conference coming up in Arizona. So on 83, you can see a snapshot here. The national conference will be held in Arizona in April, April 4th through 6th. Don't tell my wife because that's over her birthday.

I'll get in trouble. Looking forward to seeing you there. It's always a good time.

Questions, trustees?

I'm going to make— by the way, great job, great presentation, amazing, perfect timing. You planned that fantastically. That's good to have more time for you on the agenda so we're not rushing. So thank you. I will make a request on your page 86.

Your first line, there is— I just have to tell you, we put this on our website, so we can't maintain strict confidence of this data as you request in the first line. So you may want to get your lawyers to eliminate pages 86 and 87 going forward. Sorry, that's just my snark because these are published on our website. So I don't know if there's any liability for us, Chris, But the fact that you have that in there does not fill me with warm and fuzzies. All right.

To be clear, Chair Bruni, that's why the word may—. I know, but it's still in there. And I mean, these are the same things that whenever someone from a company gets up and has that first page before the presentation and no one reads it. Sorry, I just had to— maybe it's my— I lost school in my snark, but Trustee Samuels. Thank you, Chairman.

I have a non-lawyer question or comment. So we previously discussed the crossover point between reducing the draw from 5 to 4.5, and we'd had discussions on in previous meetings on each legislation that was introduced that stair-stepped it down. And before the session starts in January, I'd like to make sure we have a completely accurate description because it's probably going to get introduced again. And I'd like to know exactly when the crossover is, the difference between the stair-step versus pulling the Band-Aid off so that we are all speaking with one voice. Right.

Yeah, I have the math on that. So I'll put it together in a memo. And again, for the public— this is Greg Allen, by the way— for the benefit of the public who are new to this conversation, the concept here is that if you reduce the amount of the draw, it will reduce the amount of the draw in the short run, but you'll be saving more, and over the long run, it will ultimately reduce— it'll result in a larger draw at some point out in the future. And it's essentially simple math. And so the request is for us to estimate and justify when that crossover point hits.

We'll get on it. Thank you. And if you can use last year's legislation, it won't be identical, the stair-step approach, but at least we have an idea what it costs us in time to stair-step it down. Just as an example to tell key legislators. And just for— thanks, Trustee Samuels.

The one proposal was going from 5 to 4.9 to 4.8, but then there was some discussion toward the end. It never happened. They're just going straight to 4.5 because oil prices were high and this would be the year to do it. And so I think I would like— and Trustee Samuels, I appreciate you raising this— I would like both scenarios. Stair step as well as an all-at-once perspective because we're at $100 oil.

And so we, we might have that opportunity this year to, to not worry about the stair because let's be honest, if you overcomplexify it, it's going to likely not pass. Whereas if you just maybe go straight to 4.5, it may have a better chance of getting through the fiscal finance committees. Okay, so we'll generate two scenarios. When is the crossover point and an estimate of what that looks like. Thank you.

Other questions?

Great job. We will take a brief at ease until 10:45.

Call the meeting back to order. It is 11:02. Uh, we are going to bring Marcus and Sebastian up to talk about benchmarking, and while they come up, I just wanted to, uh, thank, uh, the mayor is, uh, of Nome is in town, and, uh, he's going to be giving some comments, uh, during this public testimony. So appreciate him and being here. It's great, great to have them and then folks from the community of Nome come to this meeting.

So thank you everyone. And Marcus and Sebastian, the floor is yours.

Uh, so this is again similar to the press policy update The Governance Committee, where they met in July, approved a recommendation by staff to have a benchmark review and update process, more governance-related mechanism to ensure that benchmarks are all truly changed. And so the committee approved it, and this is basically bringing that to the full board. Seeking approval to formalize the policy. And so this is an action item. We've got a few slides.

The charter itself is included in this presentation, but a couple of slides that essentially outline what this is. So as I just said, I mean, this is a governance mechanism to ensure that The board approves any and all policy changes. And so there is a committee of 3 that includes a member of the IAG, Talon as our consultant, and the CEO, Michelle, as the third party in that committee. And any request for change is basically brought up to this committee. Before the December meeting, December board meeting, keeping in mind that all benchmarks need to be effective 1st of July.

So that's sort of where the timetable sits.

And staff would, if required, bring up a potential change, a request for change, or a new benchmark to the committee. The committee reviews it and then forwards it to the board, either approves it or not, and then forwards it to the board.

So essentially, it's basically a governance mechanism. That's what it is, and formalizing the process. So there is a timetable, there's a path around which staff can sort of request benchmark policy, benchmark changes.

And there's a timeline, like I said, and The whole charter is included, so it's a couple of pages. I don't know if there's anything else to add to that, Chris. No, that was well covered.

Yeah. So it's an action item for the board to approve, essentially, the first board. Thank you, Sebastian. And chair of the Governance Committee is Chair Shutt, and we, we met on this a couple of months ago, and I just want to give you the floor to to discuss anything what is proposed. All right, thank you.

Uh, we, we did meet on this in July, Governance Committee. Uh, it was a good committee meeting with a lot of robust discussion and, uh, input from the staff. Um, I, you know, we, we made a recommendation as a committee for this board to approve This new policy is subject to the drafting of the charter. I'm excited personally about this step in the transparency and governance of the organization, and I fully support the notion of having a benchmarks committee in the structure to review annually and review any proposed changes to benchmarks, which ultimately is reserved to this Board for the ultimate decision, but as a working body to review those on an annual basis and then make recommendations for changes, if any. I think it's a critical step, and given the nature of how benchmarks can incentivize behavior by investment teams and staff and/or reward them with their near-annual performance bonuses.

And this, this is how we ensure that the benchmarks are appropriate and fair and don't ultimately create incentives to do the wrong thing for staff and reward staff for doing the right thing. So like I said, committee approved it and recommends it to this toll board, and I'm excited that this step in our governance and the transparency.

Chair, is that a—. I, I would make a, a motion to approve the charter that's in the packet. Thank you. Is there a second? Second motion.

Seconded by, uh, Trustee Binkley. Uh, before discussion continues, I see Devin with his hand up. Thank you, Mr. Chair. I just wanted to note that for this initial or inaugural year, because of the timing mismatch, that The charter discusses proposals being due by September 30th, but that date's already passed, and we do have some identified adjustments to some of the asset class benchmarks that we would like to examine this fall.

So we'll be asking the, the board in their consideration to acknowledge that this year might have a little different time frame. Is there a date you would I would think that mid-October we should have, just from a timing perspective. So fairly tight timeline for this year, maybe this third week. Why don't we say October 31st, just for—. That would be maximum.

Uh, Trustee Schutt and Trustee Binkley, is that friendly? Yes, it is. Trustee Binkley? Yes, it is. Okay, so that's a friendly amendment.

Thank you, Devin. Uh, further discussion on the issue?

Hearing none, a roll call vote please. Trustee Earls— and she let me know she's offline. Trustee Shutt? Yes. Trustee Samuels?

Yes. Trustee Anderson? Yes. Trustee Dinkley? Yes.

Chair Brody? Yes. Motion carries. Excellent. Thank you.

Thank you both, and we'll look forward to seeing those recommendations on October 31st. Devin, is your recommendation going to be that we hold a governance committee following the receipt of that before the December meeting?

I don't believe that's what the charter proposes, that this committee would consider the recommendations and then make a forwarded recommendation to the full board. And I read that. That's why I'm asking, like, do you just as a— since this came from the Governance Committee originally, even though it's not in the charter, that doesn't mean the Governance Committee can't review it. But I'm, I'm, and I may be looking—. Nope, you're good with this.

Okay, straight to the board. Good. Just wanted to make sure I threw that out there. I want to keep you busy.

Okay, moving on. Janet. Janet Becker-Wold, advisor. Oops. Janet Becker-Wold, advisor.

I have just one comment, and I want to thank Callum for a really outstanding presentation. And I forget how much information that they're able to provide to the board, and it's really important for all the roles that you play. But one of the things I wanted to do is take it out of relative land and put it in absolute return land and talk about kind in the last 10 years since the annual meeting to talk about last year. And yes, I recognize, and I'm not trying to hide, and no one's trying to hide the fact that there are improvements can always be made in the implementation of all these asset classes. And the board has done a great job trying to implement some of those changes, and they're in progress.

But one of the things I think, especially on this day when you pay the dividends, is to recognize that the total return has been outstanding and that the equity of your asset allocation, even in when you compare yourselves to peers, be careful because your asset allocation is different from everybody in those peer groups, intentionally different, because it meets your specific objectives determined by the board in conjunction with staff to meet your distribution objectives to both the, the people of Alaska and to the state. And so you're never going to look just like that, and sometimes that's going to be great and sometimes it's not. But it's yours. It's not— you're not trying to drive yourself to the median allocation. You're trying to do what's right for you.

So just make sure that we keep that in mind when we start looking at that and not beat ourselves up about it too much. The other thing is, is that the equity market is have giveth. This has been an incredible time to be an investor. 50% Of the permanent fund portfolio is invested in equities, either private equity or public equity. And that's going to drive the total performance of this fund going forward, as long as you have that substantial allocation in it.

And it has been a very good investment. So your compounded annual return for the 1-year period was 12.4%. Amazing. That's 1-year return. So if you look over a 10-year period, it's compounded at 9.3%, also an outstanding return.

If you go back and you look at Cowen's assumptions for equity portfolio, portfolios back in 2016, did they do 10-year forward projections? You've exceeded them by a very large margin. And that— and all investors have because equity markets have been very strong. So what that has allowed you to do is over that 10-year period and over, especially over this shorter-term period, is to meet all your objectives with flying colors. You've been able to provide a significant amount of money to fund the state budget, two-thirds of their budget, and you've been able to maintain the dividend.

I consider that to be a success. And I think the fact that we have improvements to do possibly at the implementation level is not what's driving the total return is the asset allocation. Asset allocation is the most important decision you make. And I would argue that that has been successful in meeting your objectives. And that's all I wanted to say.

Thank you, Janet. All right. Thank you, Janet. Are there questions or comments for Janet?

Janet? Helen, as your old colleague, do you have any comments? This is your chance. We all miss Janet terribly.

She manages to find the silver lining, and I actually think that's the headline. It's fund meets all objectives. And a lot of what we tend to concentrate on is important, but I think sometimes we lose sight of the headline and we do that with a lot of clients because we focus so much on relative performance and we're not— it's not always going to be like this, you know. And so would you rather be behind but return 9% or be ahead and return -12%? Because there's going to be a time when you're likely going to be ahead.

The fund's going to be down 12% or some number like that. And so it is, we should celebrate the absolute return. So thank you for bringing that up, Jen. Yep. And when I was speaking with the media a little bit ago, I said those exact words because it is important.

We have aspired as trustees to eventually get to $100 billion, and we're a lot closer, I think, than any of us thought we would be. At this point, and we brought in twice what we need for state government this year with $8.2 billion, and the legislature with their 5% of market value has been appropriated $4 billion. So that's, that is huge kudos, Devin, to you, you to Marcus, to your team. And Craig, I think it's a great point. You know, when we outperform and lose money, That's, yeah, that's not something you want.

I mean, we did very well and kudos to, again, to the team. So thank you, Jana. Thanks for making sure we keep that in perspective. And final thing is CPI plus 5 is our goal and we were at 12 point whatever percent. So that would've been a 5% better than what our objective is.

Yep, very much so. Okay.

All right. Moving on. Election of corporate officers. Mr. Chairman. Trustee Binkley.

I would like to move and ask for unanimous consent that we keep the same corporate officers as the year before. Is there a second? Second. Daniels.

I will— first of all, thank you, and I will happily accept the nomination. I will ask my vice chair if he's comfortable with that as well. I am. Thank you. Are there any others wishing to be nominated?

Everyone, uh, roll call please.

Yes. Trustee Samuels. Yes. Trustee Anderson. Yes.

Trustee. Yes. Yes.

Thank you, uh, Trustee Binkley. Thank you, Trustee Samuels, for your continued confidence And it's an honor to have been in this role and to continue to serve. It's truly, truly an honor, and I'm fortunate to be able to work with my fellow trustees. And thank you. Moving on, Devin, the calendar for the— upcoming year.

And Ethan has— our Trustee Shutt has some great news to add to that that Jennifer just— or he and Jennifer just helped secure. But I'll give you the floor. So yeah, the 2027 and 2028 proposed calendars are included in your packet starting on page 341. And of course, the next quarterly meeting— or the next quarterly meeting is going to be in the current calendar year in Juneau, but then February is also in Juneau, the 24th and 25th. And then the spring meeting, quarterly meeting, May 26th and 27th in Anchorage.

The fall, September 1st, one-day meeting in Juneau, which oftentimes is at least in part remote. And then the September 29th and 30th annual meeting in Tok, which, um, I think it's, it's a double-edged sword when we have meetings in small communities. I mean, we weren't able to have video today because of bandwidth issues, but I think it's, to me, one of the redeeming qualities of this Board of Trustees, the willingness to travel to remote parts of Alaska live with the people that we're working for for a couple of days. And so I think that it's great, and working out some of the details of a small town and the limitations that might exist there are worth the price. So look forward to— and if you guys have already worked out the possible meeting arrangements in Tok, which is another small community, that's great.

And look forward to, to that opportunity next, next fall. Real quickly, Trustee Schott, anything to add on that? Sure, thank you for the floor on that. I do. Many of you know I grew up in Toke and went to school there, and I'm very happy and proud to welcome the APFC board for the meeting next year.

And we have worked and preliminarily secured I think all the facilities, and we'll just have to figure out the IT issues, make sure we've got sufficient bandwidth and all that. But we've got a year to figure that out. And to echo Devin's comments about the smaller communities, I think it's— for a board like this, and that we serve all Alaskans, I think it's an important reminder that people who live in communities like Nome or Tok or smaller in more remote communities. You know, the headaches we have with IT and logistics and everything are things that they live with day in, day out, you know, all year round. And they're a very important aspect of our— ultimately our state community and our residents.

And so I think it's extremely respectful of this board and body to go to these communities and visit and spend a few days. And I really appreciate that as someone who grew up in a rural part of the state. So thank you all very much. Yeah, thanks, uh, Trustee Shut, and thank you for your coordination, uh, of that. I'm, I'm excited for, for going to Topeka.

Mr. Chairman, yeah, yeah, we could all bring our own individual mini Starlinks with us. I, I think we'll have it covered. Well, hopefully Scott heard loudly and clearly that we should be buying a Starlink, uh, if not buy Starlink. I think you're speaking Scott's slug language. Uh, 100%.

Back to you, Devin. Yes, um, so 2028's a ways off in the distance, and so again, you can see that we have a slate of meetings. I think the dates are more important maybe than the final destinations at this point, and we don't have a remote location currently on the calendar in —so look forward to discussions about where it might be a community that the board would want to target for that time frame. Try to make it happen. Yeah, thanks, Jeff.

Please be thinking of the letter K comes to mind. In my mind, there's cake, there's Kentucan, there's Katseview, but there's like Kibbelina. There's all sorts of opportunities, but Like, I think we should be thinking about that now. I know that we wanted to come here to Nome 2 years ago, but there was a shorebird festival that conflicted with the timing that we did. So the sooner we can get those on the books, the better, and get the rooms reserved and work with the communities.

So, Trustee Samuels, you look—. I just wanted to note that again, in 2027, that September 1st is once again opening day.

Trustee Samuels, uh, is that a motion for a date change? Is there— what is the requirement? Like, I know that we need to meet in, I think it's September, because of our auditor, um, but I appreciate the sentiment of Trustee Samuels. And so what, what flexibility do we have with that?

Well, it does. It, it correlates to the ability to get the audit work undertaken, um, and completed in a time frame. So we have to close our books and then get the audit done, and so it puts us in a crunch. Um, Starlink does work for trustees as well, I'm well aware. Uh, to be in the tree stand with your—.

I've had it, I've had it. Could, could it be August 31st, or We can definitely work on that. We'll— I'll have a conversation. Go to TOG on September 1st. We'll see what we can do.

I really think, especially for this year, the February 24th meeting, like, I would love all of us to actually be down in Juneau since we're going to have a new governor, we're going to have a new Chair Trustee Samuels. Chairman, if meeting September 1st, I will be in Juneau on September 1st. It's okay, just wanted to point it out again. Once again, it's September 1st, and in 2028 it will be September 1st. It's September 6th in 2028 on opening day.

Oh yeah, oh, I see, I see. Okay, well God bless you. I defer to Trustees Samuels and Shut, who are the hunters of the crowd, for working with Devin on that. And I know you'll be there either way, but it's a fair point. We should try— you're a volunteer, you should be— we should accommodate you as much as possible.

Other thoughts on the proposed calendar? Do you need this as an action item, or is this just a I mean, see it as action. It's just— I believe it's just informational, forward-looking and informational for the, the board's planning purposes and, um, recognizing where we're putting our efforts and if there were need to adjust. So we've discussed one potential, um, flexibility adjustment that we might try to see if we can come through. One thing I might ask for, uh, distribution to the trustees is if we know it the last 10 years worth of where we've gone, because it would be nice to— I know we've been to Barrow and Sitka and obviously Juneau, Anchorage, and Fairbanks and Kenai.

But so if there are Kodiak, so if there are in a effort to try to get to other parts of the state that we haven't been, it would be nice to have that list so we could use that in our thought process. Good, good.

Sorry, one thing I know we ran into with last year is that Comms publishes a calendar, and so if it is possible to have these dates locked in prior to their deadline, then we're not having to make a second calendar. And when is that? We'll talk to Paul when I get that, but I'm not sure if he knows the date right now. So just something to be aware of, that once we put those meeting dates out there for 2027, we don't want to really employ it. Yep, understood.

Thank you.

Anything else? Steven, on that front? That was it, thank you. I mean, from a— so, Christie Samuels, from your perspective, it like the 6th is a better day than the 1st?

No, the 1st be better. Thank you, thank you for that. All right, thank you. Uh, we now have an opportunity for public participation, and I'd like to invite the mayor up to have the floor, please.

And Mr. Mayor, thank you so much for your hospitality. It's just been My thing is— there it is. It's been a great trip for the trustees. I know that the hotel, the restaurants, the shops were all very accommodating and gracious, and it was an amazing time here. So thank you for— to you and the people of Nome for your hospitality.

As mayor and as president of the Chamber of Commerce, thank you all very much for choosing Nome to host your meeting. We greatly appreciate the time you spend in our community, and of course the dollars that you spend here as well.

Um, needless to say, the Permanent Fund is at this point an integral part of Alaska life, something that we all count on very much. And so I remember when Jay Hammond proposed it and it got voted in, I thought it was a good idea then. And I am a lifelong O'odham, and I got a new birth certificate, um, Great Interior School Indian Code.

A great big thanks to you all for your diligence and what you do for the Permanent Fund. For all of Alaska, I can't emphasize the importance of it, not just for the village, but for the fact that we're developing something that will fund our state later on when I presume oil and minerals are going to run out at some point. And by then we should have a nice large fund which to fund our state.

And that's so awesome. So awesome. So once again, thank you for choosing Nome.

I hope you have a great rest of your trip here. Hopefully this afternoon you'll head out and see some more of our town. I know the museum will be open and some of our hangups for the board coming later.

Absolutely. Thank you, Mr. Mayor. Anyone? Uh, Trustee Samuels. Thank you, Mr.

Mayor. Thanks for the hospitality. Um, just to show what a small town— our small town that all of Alaska is. Um, my parents were married here in '53, and my sister was born in Nome before statehood. Gail Phillips, former Speaker of the House, is from Nome and babysat me when I lived here when I was a baby.

And, uh, my mom taught Richard Foster when he was— she was a teacher here, and she Richard was in 5th grade. So it's a small town, it all comes around, and sure appreciate the hospitality. Absolutely, our pleasure. Um, thank you, Mr. Mayor. Appreciate the hospitality as well, and echo the remarks of Trustee Samuels.

And to your point, in terms of what the Permanent Fund provides to Alaskans, and most Alaskans know it as the dividend, but as you point out It's really the future in terms of what used to be oil revenue that provided all of our support for the services we use in Alaska, from schools to airports to roads to hospitals to everything we need in Alaska. Now, two-thirds of that budget comes from the Permanent Fund earnings. And so, as you point out, at some point it's going to be 100%, hopefully. And that's significant in Alaska's lives. Those of us who were born here and really had the benefit of the prosperity of the discovery of oil and what that brought to us once we built the pipeline, now it's not just our generation, it's the next generation and further generations that can enjoy the benefits of that as a result of the vision of people like former Governor Jay Hammond, who had the foresight to say, let's take some of that oil revenue, that resource that's going to be— that's finite, that will someday go away, put it into capital that we can deploy, receive earnings off of, that will allow future generations to enjoy that resource as well.

So thank you for pointing that out. Thanks, Trustee Binkley. Trustee Shedd— Vice Chair Shedd.

Also, thank you, your community, Mr. Mayor, for, for your hospitality and having us here. And to further highlight the connections of a very small state, um, the great-grandfather on the maternal side and his brother were two of the serum runners in Millicom.

So I— Yesterday, $200 million from Korea to build a new gas line for us. Wow, that's going to be tremendous. Now the next thing we need is a railroad from Alberta up to Nana, and from Nana to Nome. We have a whole rest of the state to run access to— to develop the— and of course, what we're developing will also— railroad makes a lot of sense once we have a border up to the beaches and has a great stellar future.

There's anything more— Excellent. Thanks, Mr. Mayor. Any— Edwards, all aboard! Devin, anything?

Mr. Mayor, thank you again. It's been an absolute joy and pleasure to be here in Nome, and we're glad that we chose Nome for this meeting. Thank you again. Thank you. You too.

And we encourage you to stay for lunch too.

Okay, so if there are others that would like to give public testimony in the room. That always includes staff. Your one chance, get out your green card, say whatever you want to Devin. Uh, online? Yeah, uh, you're online, please use the raise your hand feature for public to give public comment.

Going once. Anyone online interested in giving public testimony? Going twice. All right, we will close public testimony and thank, uh, the mayor for his, uh, his comments, and we will now turn it to Devin with other business. Any other business?

I didn't have any other business. I did want to point out that October 1st, today's meeting date, is especially— it's my mom's birthday, but maybe more importantly, Mark's birthday.

Yeah, I can't read small print for the first time. Reading glasses. So other than that, I guess earlier I did point out that we got some staff transitions. I didn't point out we have some upcoming retirements. We have a member, a longstanding member of our fixed income team, Chris Cummins, who's been with the Permanent Fund Corporation for 20-plus years, is retiring at the end of the year.

And Ed Rhymes on the real estate team is retiring in January. So a couple of, um, longstanding investors that have decided to hang up their— I don't know, green visors. I don't know what investors have, but sail off into the sunset. So congratulate them on their contributions to the fund and their future retirement. Yeah, thanks.

Congratulations, Kristinette. Thank you so much for your service to the state and to APFC. Anything else from staff? From Marcus.

Uh, final comments, any from Callan?

He's already over his time. Janet? Okay. Uh, online, I don't know if, uh, Trustee Earls is on. She's, she's not on.

Okay, we'll, uh, go to Trustee Samuels. Thank you, Mr. Chasen. Thanks to all the presenters. Uh, as usual, a lot of good information. Um, had a question for the trustees.

I think is— I, I was able to attend in Valdez. Chairman Burney presented to the city council. I thought a lot of value comes out of talking with city leadership. I think it's on the radio there. Um, I wasn't able to attend here in Nome, but it gave me some thoughts, and I talked to Pauline a little bit about what other outreach opportunities do we have that are not just to legislative bodies?

And I've seen all 6 of the trustees present in public before, and we're all pretty good on our feet. And to go into a classroom— I did this in my previous life working for Holland and Princess— is you go into a classroom and discuss how the tourism industry works. And I know that I would be willing to— if Holland can put us Harmony together to go into some civics or government classes in the various high schools where we live. And I can do a lot of Anchorage and Massou Fairbanks or, or wherever and just go in and say, here's who— what the permanent fund is, here's where it came from, here's the difference between a stock and a bond. You don't want to get too much into the details on the internal workings and what you invest in and don't, but I think it'd be a good chance to outreach the younger generation on who we are and what we do.

It's their money, the next generation's money. So I'd be willing to do it. I don't think this is a lot of staff time we're asking to put together something. We'd all have different styles. But anyway, I'd like to hear their thoughts.

I'm willing to put some time into it. I'm not going to make it a full-time job, but I think it'd be a good outreach. Trustee Samuels, I think it's a phenomenal idea, and we have a partnership with Alaska Resource Education that we could, like, talk to Becky, the executive director, and let her know we'd be willing to go to her and teach trainings or anything like that. Sure. I said I've seen all of them presented, pretty good.

ARE, I think, does a really good job, but they're trying to talk about the gas industry and mining industry and how they all work functionally, everything.

Having them do it is good, but it's a, you know, it's a good little flashlight at it. And right here, I think we could really start talking to other groups or other city groups on just the real basics. I've seen Gavin present to the legislature where you get into the indexes and benchmarking and the two funds and the one fund and all that. I agree that ARE could certainly help us, but I'm not picturing this being a big difficulty for us.

So we do have a local civics teacher that brings a class by, um, and I talk to them, you know, once or twice a semester. There will be a group of kids, and, and it is a challenge. I mean, I don't think it's— I think any outreach is good. It's just a challenge to reach out to young people that are, um, in high school, trying to get their attention with concepts that are, um, maybe not that interesting in the moment. But it is a worthwhile effort, and I think that there's likely opportunities at each one.

It's, it's the, the, the matter of making those fundamental connections. I know we had the, the superintendent of Nome Schools here yesterday, and the superintendents might be a great the organization could be an opportunity to disseminate through the superintendents to their principals and then ultimately their civics teachers that there could be an opportunity and try to reach out directly to— I would imagine this is a high school level thing we're talking about. I mean, we're giving out those gold coins that we had, the commemorative coins. The little girls really enjoyed that yesterday, but I think otherwise they didn't know what I was talking about. Yeah, but, but I certainly at the high school level there's a lot of opportunity, um, and you get a mix of kids asleep on their desk after a minute to kids that are interested.

When I did this for Holland and Princess, I got blank stares, I got people that asked very good questions, and I got yelled at. People— I mean, all these were all in Southeast communities. People had very strong opinions about that. Um, and I think that this would be more positive than how it probably was. Um, but, and I, I agree the difficulty of outreach, but what I've been told by the teachers is even they don't look like they're listening, a lot of times they are.

Yeah, thanks, Trustee Samuels. Great idea. And I want to give kudos to, uh, Devin. Uh, I know he's been on circuit going to the Rotary clubs going to the different folks, uh, or groups. I think Ralph's suggestion of using us as a resource— I know I'm willing to do that as well, uh, not just for the schools but for the Lions Clubs, for the, the Rotaries, you name it.

Use us as a resource. And I, I love Trustee Samuels's idea of having Pauline put something together that's not too complex, but that's— that could help with that, that engagement. So thank you. Uh, anything else to— to— Trustee Anderson? Yeah, thanks.

Yeah, I really like that idea too. I do know in, um, most high school classes, I think one of the requirements are Alaska studies, and maybe there's something in a curriculum type thing that could be added that would, you know, that— and I would advocate for universities, and that's I think there's opportunities there where, you know, between Fairbanks and Anchorage and Southeast, there's some opportunities there too. Other than that, yeah, no, thanks. I appreciate all of you. And yeah, another great meeting, really informative.

And it's always fascinating to hear about all the things that are happening in the investment world. So appreciate it. Well, and Trustee Anderson, I want to thank you for all of your leadership of the Cybersecurity and Audit Committee. This may, I'm hoping not, be your last meeting. So I want to urge whoever gets elected as governor to consider reappointing Brian.

But thank you for all of your excellent input over the years and your service to the state as commissioner and as a trustee. And we hope it's not the last, but it is Thank you.

Trustee Binkley. Thank you, Mr. Chairman. Just to express my thanks to the staff advisors and fellow trustees and express how appreciative I am to be a small part of this incredible organization and how proud I am of all the people, all the people who make this happen every day. Who are hardworking, who are talented, who care about this fund and care about our state. It's just a privilege to be able to work with all of you.

Thank you. Thank you, Binkley. Very well said. Vice Chair Schott. Thank you, Mr.

Chair. I won't elaborate on it, but also like to express my thanks to the staff for a great meeting, all the logistics and And everything went off very smoothly as they seem to always do. But it does require a lot of hard work by people. And as far as overall mission, I think one of the themes that was just sort of under the surface, and Chair Groome, you mentioned it a couple times with the preservation of capital theme, I think that our asset allocation, which is a dance between this board and the, investors in the APFC. I think what came across to me is it's a good balance between maximizing our risk-adjusted returns and acknowledging a portfolio that also has an element of capital preservation for if something, you know, were to turn in a dramatic way with the market.

And I think because of the excellent work of our staff, We are well positioned for adverse conditions that may come, and I really appreciate that because I have to acknowledge that we sitting here at this table have a duty toward that in our charge as well, not just to maximize the returns, but also to ensure that there is the preservation, the ultimate purpose of the fund and preservation capital. So thank you. Thank you for helping us do our job, and I'm pleased and confident that we've struck a good balance recognizing that it is best for all. So thank you. Thanks so much, Vice Chair Shutt.

Very well said. And I guess from my perspective, I want to once again thank the people of Nome for such a great hospitality, the Mother Nature for the amazing walks down the beach. For Seaglass and Muskox. And Commissioner Anderson, thank you for the forthcoming port tour. Look forward to that.

Of course, all the staff of the Permanent Fund Corporation for the work they did. Of course, I have to point out specifically Jennifer, thank you for always taking care of us. Pauline and Jennifer, thank you for flying in with me on Monday for the presentation to the No, City Council, I'm going to ask you all to keep George and his family in your thoughts and prayers, please. And with that, thank you all also for your trust in me, and it's an honor to continue to serve as chair. And with that, is there anything else for the good of the order.

Chairman, move for adjournment. Is there a second?

I'll second. Hearing no opposition, meeting is adjourned at 11:48.