Alaska Permanent Fund Corp, with millions of dollars in GameStop shares, eyes stock surge warily

Alaska Permanent Fund Corporation CEO Angela Rodell at the corporate office in 2016. (Photo by Skip Gray/360 North)

The Alaska Permanent Fund Corporation owns more than 100,000 shares of GameStop stock. That’s the video game store that made headlines this week when individual investors sent the company’s stock soaring to the dismay of hedge fund investors.

The Permanent Fund isn’t getting ready to cash in though. And fund managers are concerned about the conditions that allowed the stock surge to happen.

Fairbanks resident Connor Sherman recently purchased stocks for the first time – two shares in GameStop. But some individual Alaska investors see it otherwise.

“About a week ago, there was this big sticky post in Wall Street Bets,” said Sherman. “Sticky means moderators decide it’s important enough that they just keep it on the front page.”

R/Wall Street Bets is a page on the website Reddit, that now has nearly 5 million members.

“It was just convincing and compelling that these hedge funds just oversold themselves and overextended themselves,” said Sherman. “It seemed pretty easy and it really wasn’t that much to buy in there.”  

Sherman bought in at $35 per share. When the market closed Thursday, the stock was selling at just under $200 per share after peaking at nearly $500 per share earlier in the week.  

What happened with GameStop goes back to a common practice in investing called shorting. And it starts if a hedge fund or an individual thinks a company is overvalued.

Economist Mouhcine Guettabi explains, they’re basically betting on the stock declining.  

If the stock does decline, investors make money. If it surges, they can lose big.

Recently, Guettabi said, GameStop and many other companies were the target of a lot of shorting activity. That’s where r/WallStreetBets comes in.

“For some reason, hordes of individual investors took offense or disagreed with the premise or thought that it was unfair that there was all the shorting activity,” said Guettabi. “And what they decided to do was basically, in hordes, start buying the stock.”

And that, in turn, drove up stock prices. Prices declined significantly on Thursday, as trading was restricted. 

Among GameStop’s many investors is the Alaska Permanent Fund Corporation. The Permanent Fund is worth about $70 billion. And that means it owns a lot of different stocks. CEO Angela Rodell said the organization recently held slightly over 168,000 shares in GameStop, but that number changes daily. 

“If I get out my handy dandy calculator and see that 168,000 shares are what we had yesterday, I don’t know what their proportion is today, lets just assume it’s the same, you multiply that out, that means it’s a value of $32.5 million,” said Rodell.

That’s a lot of money, but it’s less than one twentieth of one percent of the Permanent Fund’s value. 

Rodell said GameStop is just one of over 11,000 different stocks in the organization’s portfolio. On top of that, it’s also invested in bonds, real estate and private equity.

Rodell said the Permanent Fund Corporation is invested in GameStop through an index fund, which means they can’t sell the stock on its own.

Rodell said that they accept this type of market volatility when it comes.

“We’re not going to react to one stock reacting in a particular manner that is an anomaly,” said Rodell.

She said fund managers will look for longer-term trends, but don’t get caught up in day-to-day changes in the stock market.

While Rodell said she doesn’t see the GameStop surge impacting the Permanent Fund, she is concerned about how it all came to be.

“Even if you are not buying and selling GameStop yourself, you’re still exposed if you have investment in any type of index fund that GameStop is in,” said Rodell. “I think that’s a cause for concern and I think it’s going to cause our regulators in Washington to take a hard look at how this could happen.”

Meanwhile, Sherman, in Fairbanks, said he’s not trying to give anyone else financial advice, but he’s holding onto his GameStop shares.

Correction: This story previously stated that the total value of GameStop shares the Permanent Fund Corp. holds is less than half a percent of the fund’s total value. It is less than one twentieth of one percent of the fund’s value.