Global market conditions weighed heavily on the Alaska Permanent Fund, which lost 8.5% in the first quarter of the fiscal year as its hedge fund holdings declined.

The fund’s absolute return portfolio fell 9.1% and its U.S. stock portfolio dropped 8.1%. Real estate had the only positive return for the portfolio, returning 0.2% for the quarter.

“These certainly aren’t easy times, but our advantage is right there in our name – Permanent,” said CEO Michael Burns. “Our board sets an allocation for the long term, and accepts that volatility will come in the short term. Our job now is to hold to our long term plans, and not be tempted to change course in the middle of the storm.”

The APF ended September with a value of $33 billion.

Alaska’s target allocation to alternative assets is currently at 8% evenly split between hedge funds and private equity. On the hedge fund front, its manager lineup includes: Crestline Investors, Lazard Asset Management, Lehman Brothers, Mariner Investment Group and Pacific Alternative Asset Management.