The dust-up over perceived fiduciary improprieties by one of the members of the Alaska Permanent Fund’s Board of Trustees has made it to one of the most influential publications in the financial world: The Financial Times.
In a news article that appeared Friday, reporter Sun Yu used information provided in the initial story by the Alaska Landmine to analyze and expand on information about the troubles that Gabrielle “Ellie” Rubenstein has found herself in over the past few weeks, revealing staff perceptions that she used undue influence to steer the fund’s investment analysts toward her father’s private equity firm the Carlyle Group.
Yu’s story describes how the professional managers of the fund suspected Rubenstein of trying to steer state investments to friends and family members “while seeking the dismissal of a junior employee who left her father ‘unimpressed,’ according to leaked internal emails seen by the Financial Times and interviews with people with direct knowledge of the fund’s operations.”
Yu describes Ellie Rusenstein as “The daughter of one of the most powerful figures in US finance,” due to her relationship with her father, billionaire David Rubenstein.
Chris Ullman, a spokesman for Ellie Rubenstein, acknowledged to Yu that the trustee had made about 20 referrals of external asset managers to Alaska Permanent Fund staff, but he said she followed established protocols and had not exerted improper pressure. Through Ullman, she denied setting up a meeting between employees and her father, or seeking to have anyone fired.
“She played no role in investment decisions and no capital was deployed to those investment firms,” Ullman said to Financial Times.
That is not how the staff relayed the interactions, however, according to Yu’s reporting, which reinforces the initial documents divulged by the Alaska Landmine, although it appears true that the staff didn’t act on Rubenstein’s advice.
Yu reported that Rep. Cliff Groh, a Democrat from Anchorage, has called for a hearing into the “disturbing conflicts of interest” at the fund.
“The legislature must provide oversight to the Permanent Fund to protect it from the apparent threats it faces, including the risk that investments will be influenced by cronyism instead of what’s best for the fund,” Groh said in a letter to the Legislature.
Yu also reports that since the email messages were leaked to the Alaska Landmine, Rubenstein has sought to ban employees from forwarding internal emails.
The Governance Committee of the Board of Trustees did hold a hastily arranged meeting last week to discuss how to repair the damage done to the reputation of the board by the leaked emails.
After that meeting, the Permanent Fund issued a statement that said, in part, “The Governance Committee affirmed that APFC’s processes and systems are in place to ensure efficient internal operations that support our work on behalf of Alaskans. The Committee and Investment Advisory Group (IAG) members emphasized the importance of defined roles and responsibilities for Trustees and Staff in collaborative processes.” The complete statement is at this link.
“The leaked emails portray Rubenstein as eager to arrange meetings between staff and her business partners in private funds, though these rarely produced concrete results,” Yu reports.
“The unfolding drama at the US’s largest state sovereign wealth fund underscores the governance challenge facing a six-person board comprised mainly of financial laymen. As fortunes have cooled for Alaska’s oil industry, the fund has come under pressure to generate greater returns to meet its obligations,” Yu reports. That might lead to riskier plays.
Since taking a seat on the board, Rubenstein has been focused in increasing the Permanent Fund’s exposure to alternative investments.
Allen Waldrop, director of private equity investments at APFC, said in a February email to colleagues that Rubenstein had arranged a meeting last November in London between her father and a junior analyst, Yu reports.
“This was not something we discussed in advance nor did we plan when we arranged the trip,” wrote Waldrop in the email. After the meeting, Marcus Frampton, the chief investment officer for the Alaska Permanent Fund, said in a separate email that Ellie Rubenstin told him the analyst should be fired because David Rubenstein had been “unimpressed” with her.
This reported action is denied by Chris Ullman, who is Ellie Rubenstein’s personal spokesman and who worked for her father for many years.
Yu reports that the Carlyle Group told him that it had arranged the meeting, which contradicts the version of events demonstrated in the leaked emails.
“In another email in January, Frampton told colleagues that he considered Ellie Rubenstein’s efforts to make connections to private credit managers a ‘conflict of interest,’ deeming it a ‘more serious topic and perhaps more uncomfortable to address.'” According to that email, Ellie Rubenstein had made “dozens upon dozens” of investment managers recommendations. The investment team took a pass on all of them, but among those referrals was TCW, which is a Carlyle-backed asset manager whose principles had invested in Ellie Rubenstein’s equity fund, “Manna Tree,” which invests in food quality and security.
The next quarterly meeting of the Board of Trustees for the Alaska Permanent Fund is May 29 in Utqiagvik. Alaskans may observe the meeting via WebEx. Meeting information can be found here.
APFC was created by the Alaska State Legislature in 1980 as an independent state entity to manage the oil-royalty assets of the Alaska Permanent Fund on behalf of current and future generations of Alaskans and other funds designated by law.
The Alaska Permanent Fund itself is now an $80 billion sovereign wealth fund first established in 1976 by Alaska voters to preserve and convert the State’s non-renewable mineral and oil wealth into a renewable financial resource for generations of Alaskans. Alaskans receive a dividend from the fund annually, through an appropriation by the Alaska State Legislature, which determines the amount that lawmakers think they can give to “shareholders,” after skimming from the statutorily established dividend formula to pay for state government employees.
Other news stories about this developing issue are linked below.
