While DPI is a validator, it shouldn’t be looked at as a measure of performance, particularly in isolation, Allen Waldrop, director of private equity at Alaska Permanent Fund Corporation, told Private Equity International senior reporter Madeleine Farman on the sidelines of PEI Group’s NEXUS 2024 summit in March.
“If you look at one group’s returns and they have a 0x DPI and another group has a 2x DPI, [with] the one with the higher DPI there’s less risk of movement in those returns, so you can have a higher confidence level,” said Waldrop. “But expecting a high DPI in recent funds is not something we expect, and it’s not something I think others should expect because this is an illiquid asset class.”
“There’s a lot of attention on DPI and… maybe the talk about it is driving managers to perhaps do things that probably aren’t optimal from a long-term return perspective, but helpful in the short term to their LPs who want capital back.”
Waldrop also discussed the $78 billion sovereign wealth fund’s approach to portfolio construction following its cashflow-positive year in 2023; his checklist for managers seeking a piece of APFC’s pared back private equity budget this year; and the types of companies sought for its direct and co-investment portfolio.
