Permanent Fund travel expenses include some business class trips paid for by private investment managers

Marcus Frampton, the chief investment officer of the Alaska Permanent Fund Corp, spoke at a conference in Spain in September on meeting new challenges for sovereign wealth funds.

Frampton was part of a panel discussion on “Navigating Global Currents: How Sovereign Wealth Funds are Meeting New Challenges” at the International Forum of Sovereign Wealth Funds.

Jason Brune, who has been picked twice by Gov. Mike Dunleavy to be one of the six trustees of the Permanent Fund, somehow got the idea that while on his trip to Madrid, Frampton found himself squeezed into a middle seat.

It’s taken me a while to get to this, but Brune raised the topic during the annual meeting of the fund trustees in September and it is worth noting.

This came up in the context of the Permanent Fund trustees discussing the travel budget for the fiscal year that begins next July. The fund staff had sought an increase to $1 million, up from the $596,808 spent in the last fiscal year and the $800,000 designated for this fiscal year.

In the end, the trustees trimmed the travel proposal to $900,000.

Early in the discussion, Brune was taken aback at the notion of Frampton in a middle seat while flying to Europe on business.

Frampton, who earns more than $380,000 a year at the fund, corrected Brune to say it was not a middle seat.

Brune was undeterred.

“Aisles, whatever it was, it was not . . . We’re an $80 billion company, I’m sorry. They have pods, you pay more for them. But you are going, you are meeting, making deals for our organization and you need to be ready for prime time when you’re there. Or you need to stay for a couple of days extra to get rested,” Brune said.

”I know we’re a state entity but we have to make sure we’re taking care of our staff. And the little extra cost that it is to fly you business class is worth every penny with the, making sure our staff is ready for prime time when they get there.”

“So I would recommend consideration of a change in state policy for our folks that are representing the largest funder of our state government in making investment opportunities abroad to fly business class,” said Brune.

Deven Mitchell, the executive director of the Permanent Fund, said he would do what the board wanted, a diplomatic way of not voicing an opinion.

Trustee Craig Richards, who advocated a travel budget of $900,000, not $1 million, opposed the business class idea and said it wouldn’t go over well.

“I know what’s gonna get the corporation in trouble. And bloated travel budgets and flying business class is one of the things that my experience has taught me can get public organizations into some trouble, with your overseers,” said Richards.

“There’s a reason that I’m spending 10 minutes on $100,000 right? It’s because to me this is a red flag and if it’s a red flag to me it gonna be a red flag to others. So I would just encourage us to be very careful about adopting a policy that allows for use of business class.”

But it turns out that Permanent Fund employees do fly business class in certain circumstances—such as when the state is not directly paying the bill.

Managers of investment funds in which the APFC has holdings pay for transportation for employees at times, APFC Executive Directory Deven Mitchell said.

In cases where APFC managers are doing due diligence on a holding, the fund manager provides travel.

Ethan Schutt, the chair of the trustees, said authorization for such trips comes to him and he has asked questions at times, but didn’t recall ever rejecting a trip paid for by a fund manager under contract with the APFC.

In Frampton’s trip to the Spain conference, there was no investment fund manager paying the bill and he was simply attending a board meeting, trustee Gabrielle Rubenstein said, so he did not fly business class. This was not like his usual trips overseas, she said. “Usually the manager would pay for his travel,” she said.

Brune said he did not know that APFC has employee travel which is missing from the state budget line item for travel.

I suspect that many legislators don’t know this either.

“With other state entities it goes into your travel line item regardless and you just have different funding sources, so that’s different than I was aware of. So I guess my concern is alleviated,” Brune said.

My concern is not alleviated.

Mitchell defended the practice of accepting paid travel from companies where the state has invested money.

“It’s like a sunk cost and so not taking advantage of the travel comfort level isn’t going to benefit us directly. It would benefit us in some proportion relative to our investment in the fund,” said Mitchell.

These are all instances, he said, in which the Permanent Fund has already made a deal. The Permanent Fund needs to include all of these travel expenses in its budget and disclose them to the public.

I have asked the APFC for details on how often private investment managers pay for state employee travel and how much it costs.

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