January 23, 2007
The stock rally that started mid-year continued through the second fiscal quarter, and the Fund's stock portfolios contributed the most to the total return. Non-domestic stocks were the strongest asset class in the Fund, returning 11.4%, and domestic stocks returned 6.9%.
According to an Alaska Permanent Fund Corporation news release, continued economic expansion brought better than expected growth in the European markets. When combined with strong returns from emerging markets, non-domestic stocks almost doubled the return on domestic stocks. A number of factors may have created the economic environment that allowed for the domestic side of the rally. The Federal Reserve held firm on short-term rates, and declining oil prices and a mild start to the winter may all have eased inflation fears.
Quoting the news release, "In this pleasant but unusual environment, all of the Fund's asset classes had positive returns for the quarter, including real estate, returning 4.2% for the period. Domestic and non-domestic bonds returned 1.3% and 1.2% respectively. Absolute return gained 4.7%."
The Fund has earned $1.9 billion in statutory net income in the first half of fiscal 2007. The Permanent Fund Dividend is calculated using an average of statutory net income over five years, and the value from fiscal 2002 that falls out of this year,s calculation is $257 million. As a result, at this time dividends are expected to be higher this fall.
The Fund's significant growth in the second fiscal quarter helped it reach a new milestone in January. The total unaudited value of the Permanent Fund grew past $37 billion for the first time on January 12.
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