How Alaska’s Rainy-Day Fund Investment in DigitalBridge Prompted Reforms in Governance & Oversight

Analysis

The case of Alaska’s investment into DigitalBridge illuminates critical issues around governance, fiduciary duty, risk exposure, and transparency when public funds—especially those designated as reserves—are deployed in private equity or other illiquid investments.

1. Scope and Timeline of the Investment

In July 2025, then-Revenue Commissioner Adam Crum executed a commitment of US$50 million of the CBRF’s roughly US$3 billion reserve into DigitalBridge, with a contract value of US$75 million of which US$25 million remained discretionary. Crum left office August 8, 2025, but managed to close only the DigitalBridge investment before departing; two other proposed investments (each US$75 million) were never executed.

2. Departures from Protocol and Governance Weaknesses

The WilmerHale review notes that the standard “non-routine investment protocol” was not adequately followed—documentation was incomplete, due diligence was neither rigorous nor holistic, and Treasury staff raised concerns about illiquidity that were not fully addressed. Furthermore, the protocol called for consultation with external experts and notifying legislative finance committee chairs; attendance to these were inconsistent or insufficient.

3. Fiduciary Duty and Statutory Risks

Although the report concluded no laws were broken, it raised questions about whether Crum’s statutory fiduciary obligations—especially to protect state savings and avoid excessive risk—were met. The decision to place reserve funds in long-term, illiquid investments counters the conventional purpose of the CBRF as an emergency buffer. Critics argued tying up funds possibly needed for operations in short order was imprudent, especially with Alaska’s budget exposed to volatile oil revenues.

4. Transparency, Legislative Awareness, and Oversight

Lawmakers including Senate President Gary Stevens and House Speaker Bryce Edgmon said they learned of the investment only after its execution, via a Sept. 30, 2025 call, raising concerns over the lack of legislative input. Crum maintains that both the Governor’s Office and Department of Law were aware and had approved, though timing and extent of that awareness are in contention.

5. Strategic Consequences and Precedents

• Alaska will now be less able to use the DigitalBridge investment as a future model without reform: Administrative Order 362 was signed by Governor Dunleavy to enact all four WilmerHale recommendations aimed at tightening governance.
• The public and legislative uproar may constrain future administrations from exercising delegated fiduciary discretion without enhanced checks and visibility.
• Given that the investment was unwound with a reported small loss (~US$800,000), in hindsight the financial cost was manageable, but the opportunity cost—foregone liquidity and potential by tighter oversight—could be greater under stress scenarios.

6. Open Questions

• What were the internal risk models or projections used in valuing DigitalBridge and alternative private equity options, particularly related to liquidity timelines? The report redacted some comparisons.
• To what extent were future possible draws on the CBRF accounted for in deciding the permissible percentage to invest, especially with expectations of needing reserves soon?
• How will the proposed governance reforms be measured, enforced, and made transparent to the public and legislature going forward?
• What led to the decision to sell the DigitalBridge stake when done so with a modest loss—was it strategic exit, pressure from investigators, or risk mitigation?