In a recent ION Influencers fireside chat hosted by Giovanni Amodeo, Allen Waldrop, Deputy CIO – Private Markets at Alaska Permanent Fund Corporation (APFC), shared his insights on navigating market uncertainty.

The discussion covered a range of topics from investment strategies to the impact of global events on private markets. Allen Waldrop’s insights provide a comprehensive view of how APFC navigates market uncertainty through disciplined investment strategies, robust diligence processes, and a long-term perspective. His emphasis on diversification, courage, and adaptability offers valuable lessons for investors facing volatile market conditions.

Background and Role at APFC

Allen Waldrop began by introducing APFC, a sovereign wealth fund based in Juneau, Alaska, which manages oil and gas royalties to support the state’s budget and pay dividends to its citizens. He shared his career journey from accounting at KPMG to his current role, emphasizing his experience in M&A, restructuring, and portfolio construction.

Key Topics Discussed

1. Investment Strategy and Process

• Detail to High-Level Strategy: Waldrop highlighted the importance of understanding detailed investment processes and how this knowledge aids in making high-level strategic decisions.
• Robust Diligence Process: Emphasized the need for a disciplined and thorough diligence process to stay resilient in various market environments.

2. Market Signals and Tracking

• Capturing Signals: Discussed the importance of tracking portfolio performance and identifying themes that can inform future investment decisions.
• Distilling Information: Addressed the challenge of distilling vast amounts of information into key drivers for investment decisions.

3. Impact of Current Events

• Tariffs and Global Trade Dynamics: Explored how tariffs and deglobalization affect investment strategies and market behaviors.
• Market Volatility: Examined the effects of market volatility on IPOs, M&A activities, and the liquidity of private markets.

4. Scenario Planning

• Best and Worst Case Scenarios: Waldrop stressed the importance of diversification and long-term planning to navigate uncertainty.
• Discipline and Courage: Highlighted the need for discipline in following investment strategies and the courage to invest during challenging times.

5. Manager Selection and Private Equity

• Mid-Market Focus: APFC’s preference for mid-market and lower mid-market firms with demonstrated track records.
• Generalists vs. Specialists: Discussed the pros and cons of investing in generalist versus specialist firms.

6. Private Credit and Infrastructure

• Private Credit: Identified direct lending and specialty lending as key areas, especially in the face of potential recession.
• Infrastructure Investments: Opportunities in digital infrastructure, energy transition, and traditional power generation.

7. Sustainability and Due Diligence

• Environmental Considerations: While APFC does not have a specific mandate for climate or sustainability, it invests in firms that comply with regulations and make good business sense.
• Evolving Due Diligence: Increased focus on supply chains, customer bases, and downside scenarios in investment models.

8. Co-Investments and Secondary Markets

• Co-Investments: APFC’s approach to maintaining active co-investment strategies despite market liquidity challenges.
• Secondary Markets: Concerns about private equity firms focusing on their best assets and the implications for fund performance.

9. Succession Planning

• Manager Succession: Importance of understanding team dynamics and career stages to ensure smooth transitions within investment firms.

Key timestamps:

00:07 Introduction to the Fireside Chat
03:49 Building Effective Investment Processes
06:21 Understanding Market Events and Their Impact
10:29 Navigating Uncertainty in Investment Strategies
11:53 The Courage to Invest in Challenging Times
13:50 The Role of Specialists vs. Generalists in Private Equity
15:21 Exploring Opportunities in Private Credit
16:44 Long-Term Opportunities in Infrastructure Investment
19:08 Evolution of Due Diligence Practices
19:44 Recession Fears and Market Exposures
20:17 Scrutiny of Investment Strategies
20:51 Unforeseen Risks in Investments
22:23 Maintaining Activity Amid Market Challenges
23:07 Concerns Over Asset Management Strategies
24:36 Assessing Succession Planning in Funds
25:35 Communication and Transition Challenges
26:17 Closing Remarks