Alaska Permanent Fund board to consider changes after leak of concerns over trustee

The Alaska Permanent Fund Corp. board of trustees is considering changes to the policies it uses to govern itself in the wake of its top investment officer expressing concern, in leaked emails, that a trustee has conflicts of interest in using her influence to attempt to affect how the $80 billion fund is invested.

The changes would involve information technology, “trustee interactions and information that may be provided by trustees” and the relations between the trustees and fund staff, board chair Ethan Schutt said Wednesday after the board held a two-hour discussion that was closed to the public.

Trustee Adam Crum, the state revenue commissioner, emphasized the fund’s importance to the state. It pays for most of the general-purpose revenue for the state budget, as well as for annual dividends to every eligible resident.

“We’ll be working on this, to make sure we rebuild the overall public trust of the organization,” Crum said.

The board held a special meeting on short notice after the email leak, in which fund Chief Investment Officer Marcus Frampton raised concerns with other fund managers that trustee Gabrielle “Ellie” Rubenstein has been arranging meetings of investment staff with people who have invested in her own and her father’s firms. The leak was first reported on April 27 by political writer Jeff Landfield for his site The Alaska Landmine. 

Before going into the closed session, trustees were divided over whether the primary concern was the leak or the effect of trustee behavior on the fund. Trustee Jason Brune was focused on the leak, while trustee Craig Richards raised broader concerns about trustee behavior and said he opposed holding the special meeting without more deliberation. He attributed the leak to Permanent Fund staff trying to protect themselves. 

“I’m less concerned about leaks than I am about fixing the behavior that caused the leaks,” Richards said before the closed discussion. 

Crum said Richards’ statements were the first time he had heard in a board meeting about concerns over trustee behavior. 

Leaked emails

Rubenstein is the co-founder and managing partner of Manna Tree Partners, a private equity firm investing in food companies, like organic egg producer Vital Farms and kombucha maker Health Ade. Private equity is a term for investment funds shared by wealthy organizations and people, which are not publicly traded and are less regulated than stocks. 

Since joining the Permanent Fund board in July 2022, Rubenstein publicly has expressed interest in the fund investing more in private equity and in assets known as “private credit,” a term for large loans by organizations other than banks. 

The senior staff emails say that Rubenstein arranged a meeting between an investment analyst — a lower-level staff member at the fund — and her father David Rubenstein, who co-founded one of the largest private equity firms in the world, the Carlyle Group, and who Forbes estimates to be one of the 400 wealthiest Americans. 

Ellie Rubenstein conveyed to fund staff that her father wasn’t impressed with the analyst and that she thinks the analyst should be fired, according to the leaked emails.

Rubenstein also questioned whether the fund has the right team managing private equity and whether the right people oversee private credit and real estate investments.

In an email to the fund staff member in charge of managing risk, Frampton wrote of Ellie Rubenstein: “As we all know she has made dozens upon dozens of investment manager referrals in her 18 months on the APFC board. Many of these have been in the private credit space and my team has declined to pursue all of them.”

He then described three particular referrals: 

• Rubenstein’s “emphatic pitch” for the fund to invest with TCW, a Carlyle Group subsidiary whose principles are limited partners in Manna Tree Partners;
• A request by Rubenstein for fund staff to review a private credit firm run by a Manna Tree client, who she asked the staff to meet with; and 
• Rubenstein’s frustration that the Permanent Fund’s private credit manager is not reviewing Goldman Sachs’ private credit funds more seriously. Frampton said it also appears that Rubenstein has a pre-existing relationship with Goldman Sachs.

“I think we will have to see how aggressive she is in these pushes going forward,” Frampton wrote in the email. “But I would put it out there that a reasonable person looking at the facts here might question whether she has some conflicts that are clouding the independence of her positions here. A reasonable person also might ask the question of whether she would be more enthusiastic about APFC personnel handling private credit investments had we elected to invest in TCW, Churchill or Goldman Sachs private credit funds. A reasonable person might wonder if her current position is some sort of retaliation for rebuffing these investment referrals.”

Frampton also said in a January email that there is skepticism by some analysts regarding private credit, noting the chair of the Swiss investment bank UBS said there’s a growing “bubble” in private credit. Private credit roughly doubled in size over four years beginning in early 2020, reaching $1.7 trillion globally to early 2024, according to data cited by the Federal Reserve.

Frampton said in one of the emails that Rubenstein told him that Gov. Mike Dunleavy wouldn’t reappoint Schutt to the board when his term ends in July. Schutt said at the end of the meeting on Wednesday that he was aware of the staff’s concerns over Rubenstein’s behavior at the time the emails were written.

Permanent Fund Executive Director Deven Mitchell, the Permanent Fund’s top executive, acknowledged during the open portion of Wednesday’s meeting the seriousness of the leaks. Mitchell said that all of the fund managers who received the leaked emails denied leaking them. He also said the fund’s technology staff say there are limits to how much leaks can be stopped, noting that even the U.S. Department of Defense experiences data leaks. 

Rubenstein’s position

Rubenstein didn’t address the concerns during the public portion of the meeting Wednesday.

She defended her actions in a written statement sent in response to a request for an interview:

“Introducing and connecting Permanent Fund Staff to investment firms so that they can explore opportunities is an appropriate and valuable role and is common practice among state pension boards, endowments, and sovereign wealth funds,” she said. “In this role, I have always followed the Permanent Fund Board’s ethics rules and disclosure requirements, and I was unaware of these concerns about my service on the Board.”

She criticized the leak. 

“That someone leaked internal messages containing confidential information to the media is disturbing; it is a breach of policy and trust, and it distracts from the important work the Permanent Fund Trustees and Staff are doing for the State of Alaska,” she said.

Rubenstein has supported a goal for the fund of reaching $100 billion in four years, which would require the fund to greatly increase its annual growth from what it is projected to have with its current assets. While the board adopted the four-year goal, it hasn’t changed its annual goals or current allocation of assets. State law puts limits on how the fund can borrow money to invest. Rubenstein has supported the fund borrowing money more aggressively to invest it. State law limits fund borrowing, and fund staff have said the law would have to be changed to borrow much more.

Before the closed discussion Wednesday, Richards called for board policy changes to better set the expectations for trustee behavior. 

“Ultimately, it is governance reform that is going to be necessary to solve the core underlying problem here,” he said.

Richards said the volume of referrals from a trustee have made the fund investment staff uncomfortable, and the trustee behavior continued after they heard about the staff concern. He added that direct trustee communication to staff is making fund managers feel “a little undermined.”  And he said employees feel threatened about their jobs in dealing with trustees.

Richards also alleged that the board is discussing more things “behind closed doors”  than it used to.

Brune denied violating open meeting laws and described Richards’ statement about secret discussions as “pretty serious allegations.” In the past, Brune has supported exempting the board from the state’s open records law. 

Before the board discussion, there was a brief public comment period in which Schutt read an email from one member of the public calling for the board to remove Rubenstein,  citing a provision of the state ethics law that bars state officials from using their offices for personal gain, while another email called for her to resign. The six trustees are appointed by the governor, who can only remove them for cause. 

The board voted 4-2 to close their discussion to the public, citing a provision of state law that government bodies may discuss in closed session “matters, the immediate knowledge of which would clearly have an adverse effect upon the finances of the public entity.” 

Richards opposed the motion, which allowed the board to dismiss from the meeting a lawyer charged with advising them to adhere to the state’s open meetings law. Richards later said that the lawyer remained present for the entire discussion.

Other than Rubenstein, all of the trustees who approved holding the closed session are current or former members of Dunleavy’s cabinet: Brune, a former environmental conservation commissioner; Crum; and Transportation and Public Facilities Commissioner Ryan Anderson. The two who opposed it — Richards and Schutt — haven’t been in his cabinet. 

The corporation said no external breach of fund’s data occurred.