EDITORIAL: Alaska’s Permanent Fund can’t afford trustee’s half-baked statements

The history of the Alaska Permanent Fund is one of our state’s great success stories — a rainy-day fund established by Gov. Jay Hammond and the Legislature in the height of the oil boom that has steadily grown to be not only Alaska’s biggest savings account but also its biggest source for operating revenue, eclipsing even the oil money that helped establish the fund in the first place. As messy as Alaska’s long-term budget outlook is today, imagine what it would be like without the billions of dollars the Permanent Fund’s earnings have contributed, both in dividends to residents and the funding of what is now a substantial percentage of state services.

But to hear Gabrielle “Ellie” Rubenstein, vice chair of the board of trustees of the Alaska Permanent Fund Corp., tell it at a Saudi Arabian investors’ summit this fall, you’d think Alaskans were a bunch of rubes who had been lucky to Forrest Gump our way to financial success before she came along. In a brag-filled discussion called “New Faces of Global Capital,” Rubenstein talked up her close ties with Gov. Mike Dunleavy, talked down the acumen of her fellow trustees and made several inaccurate claims about the trustees’ investment plans and her own role.

At various points in the question-and-answer session about global finance trends, Rubenstein told moderator Edie Lush that:

• She was the first woman vice-chair in APFC history. There have in fact been three previous women who have either been chairs or vice-chairs of the trustees; the first was Grace Berg Schaible in the mid-1990s, who chaired the board. Melphine Evans was a vice-chair of the group from 2000-2001, and former Department of Revenue Commissioner Lucinda Mahoney was a vice-chair in 2021, just one year before Rubenstein was appointed as a trustee.

• The other members of the board of trustees were “all politicians.” A review of the board’s current membership shows that none of its members hold or are candidates for elected office.

• She is “the only professional investor on the board in history.” There have, of course, been many members of the board of trustees with professional investing experience, most notably Elmer Rasmuson, who ran the National Bank of Alaska for decades, established the Rasmuson Foundation (which funds millions of dollars in Alaska-based programs annually) and, most importantly, was a steady hand in the Fund’s formative years, charting a conservative course that kept its returns steady despite economic chaos in the stock market and the state’s oil-dependent economy.

• Her father David Rubenstein, a billionaire private equity tycoon, was “not impressed” by the board’s decision to decrease its level of investment in private equity. Rubenstein’s Carlyle Group manages about 1% of the Permanent Fund (which sounds small, but that sum is in excess of $800 million), so Rubenstein’s discussions with her father about board plans in which he has a direct financial stake certainly seems like an inescapable conflict of interest — and a recipe for potential self-dealing, given her own role as a private equity firm CEO and aggressive promotion of increased private equity investment by the Fund.

• The trustees were about to approve her “baby,” a high-risk plan to borrow billions to make bets on private equity investments. That plan, part of Rubenstein’s goal to juice the Fund’s value to $100 billion in three to five years, was rejected just days after Rubenstein’s talk in Saudi Arabia. The rejection was a good move by trustees amid a turbulent investment climate — as others have noted, that investment plan was far more optimistic about returns than is prudent, and would have the state taking major financial risks with its only major source of investment income. Given that the Fund’s contributions in funding the state’s operating budget are essential, that was a risk that most of the trustees knew Alaska couldn’t afford.

Rubenstein spent time during the question-and-answer session talking about her fiduciary responsibility to the state, an investing term denoting the obligation that people (such as the Permanent Fund trustees) have to act in the best interest of their clients, rather than their own self-interest. In the case of the Permanent Fund, Rubenstein’s client is the state, and by extension the Alaskans who benefit from the fund. It’s ironic that Rubenstein noted her fiduciary duty, because she was in effect shirking that responsibility throughout the talk. Anyone with even a passing understanding of the Permanent Fund’s management and its history who heard Rubenstein talk would know that she was seriously mischaracterizing it with an eye toward inflating her own importance — and if she was willing to make such misstatements in front of an audience of investors and financial professionals, could they trust her acumen related to the management of the fund itself? For that matter, can we Alaskans?

Put simply, Rubenstein’s loose talk in Saudi Arabia gave Alaskans reason to doubt how well she understands and how seriously she treats her responsibility in managing the fund that, in every realistic plan for Alaska’s future, stands at the center of the state’s revenue picture. This is our state’s nest egg; we can’t afford to have it handicapped by high-risk gambles, and we certainly can’t have its reputation colored by the misrepresentations of trustees. Rubenstein owes Alaskans an explanation for her statements, and if Dunleavy believes she should remain as a trustee, he needs to tell Alaskans why he believes she’s the best person for that role. Absent that explanation, there’s a strong case that Rubenstein should be removed as a Permanent Fund trustee.