Permanent Portfolio Family of Funds

Last updated
Permanent Portfolio Family of Funds
Company type Limited liability corporation
Industry investment management
Founded1982
Headquarters
San Francisco
,
U.S.
Area served
USA
Key people
Michael Cuggino
ProductsPermanent Portfolio;
Short Term Treasury Portfolio;
Aggressive Growth Portfolio;
Versatile Bond Portfolio
AUM $17 billion [1]
Website Official web site

Permanent Portfolio Family is an American mutual fund investment company founded in 1982. [2] The company's products consist of four mutual funds. Its flagship fund, the Permanent Portfolio, is based on the investment strategies of Harry Browne.

Contents

History

The company was established in 1982 and its first offering was a mutual fund called the Permanent Portfolio (PRPFX). [2]

The Short-Term Treasury Portfolio (PRTBX) was founded in 1987. [2] A stock fund called Aggressive Growth Portfolio (PAGRX) was opened in 1990 [2] and Michael Cuggino was hired to manage it. [3] In 1991, the company added the Versatile Bond Portfolio (PRVBX) which invests 80% or more of its net assets in bonds. [2] Cuggino, a Certified Public Accountant took control of the Permanent Portfolio fund in 2003 when his predecessor was sanctioned by the Securities and Exchange Commission. [2] [4] [5] Other company leaders include: James H. Andrews as Treasurer, Susan K. Freund as Chief Compliance Officer and Derek D. Hyatt as their Senior Investment Analyst. [2]

Products

Permanent Portfolio fund

The company's flagship fund was established in 1982 by Terry Coxan and John Chandler and "mimicked an early version of the permanent portfolio concept" of Browne. [6] According to Kiplinger's Personal Finance magazine, the fund was designed to neutralize high inflation by investing in precious metals, Swiss bonds, U.S. Treasury bills and natural resource stocks. This was similar to Browne's strategy of a portfolio invested in equal 25% portions of bonds, stocks, cash and gold with annual re-balancing. Browne's strategy was portrayed as a "fail-safe" investment strategy designed to thrive in any economic condition, and was outlined in his 1999 book Fail-Safe Investing. [7]

The Permanent Portfolio mutual fund, however, is more complex than Browne's original concept and has six asset categories. [4] The fund aims to invest in a fixed percentage of uncorrelated, asset categories to minimize risk in changing economic climates. [2] These include 35% in government bonds, 25% in gold and silver bullion, 15% in growth stocks, 10% in cash and Swiss francs and 15% in energy, mining, and real estate stocks. [7] The fund's concept is to "preserve capital and provide low risk growth" through diversification. [8] From 1982 through 2008, the fund's assets under management (AUM) were less than $50 million but they grew to $1 billion in 2007, $3.4 billion in 2008 and $5 billion in 2009. [4] As of 2012 the fund had $17 billion in assets under management [9] with 20% invested in gold bullion [10] and a "relatively high" 0.71% annual management fee. [11] [12] [13]

In the 1990s the fund had poor shareholder retention as it "badly trailed" most stock funds during a prolonged bull market. [14] However, between Feb. 2, 2001 and February 2, 2011, a volatile period for the overall stock market, the Permanent Portfolio fund averaged an 11 percent annualized return in comparison to a 1.6 percent annualized return for the S&P 500 index. When the S&P 500 index dropped 37% in the 2007–2008 financial crisis, the Permanent Portfolio fund lost 8%. [7] From its 1982 inception through 2010, the fund had average annual gains of 6.5% in comparison to the S&P 500 stock index's 10.6% average annual gain over the same period. [15]

The 2012 book The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy discusses the fund's benefits and limitations. The authors say that the fund manager's investment decisions and the costs associated with an actively managed mutual fund are a downside when compared to an index fund, but points out that the fund's management fee of 0.78% per year is below the mutual fund average. [6] According to a 2006 article in Kiplinger's personal finance magazine the fund has delivered on its goal of "long term stability with occasional market beating returns." [16]

Aggressive Growth Portfolio

The Aggressive Growth Portfolio (PAGRX) is described as a "diversified, multi-cap core, U.S. equity fund" with the goal of long term appreciation. [2] In 2002 it had $24 million in assets under management and consisted of large and mid-sized companies. [3] In the ten years prior to March 2002 it ranked #34 amongst 797 other diversified mutual funds and had a stock management turnover rate of 6%. [3] During that period it never had a negative year and its average annual gain was 2% better than the S&P 500 Index. In 2002 its annual management fee was 1.29%. [3]

Other

The company also offers a Short-Term Treasury Portfolio (PRTBX) which it describes as a short-term U.S. Treasury bonds fund. [2] The firm's Versatile Bond Portfolio (PRVBX) is said to invest 80% or more of its net assets in bonds, with wide discretion as to credit quality, duration and other factors. [2]

See also

Fail-Safe Investing

Related Research Articles

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References

  1. ↑ Unknown author (July 31, 2012). "Market Chatter". Midnight Trader.{{cite news}}: |last= has generic name (help)
  2. 1 2 3 4 5 6 7 8 9 10 11 Unknown author. "About Us". Permanent Portfolio Family of Funds. Archived from the original on February 16, 2013. Retrieved Jan 24, 2013.{{cite web}}: |last= has generic name (help)
  3. 1 2 3 4 Kosnett, Jeffrey (May 2002). "A Gold Bug Gets It Right". Kiplinger's.
  4. 1 2 3 Zweig, Jason (September 17, 2010). "Unlikely Superstar: How a Forgotten Fund Got Hot in a Hurry". The Wall Street Journal. Retrieved January 24, 2013.
  5. ↑ Unknown author (Feb 11, 2010). "Stocks slip again as slow-recovery fears multiply". Bloomberg News.{{cite news}}: |last= has generic name (help)
  6. 1 2 Rowland, Craig, Lawson, J.M. (2012). The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy. Hoboken, New Jersey: Wiley Global Finance. pp. 303 to 310.{{cite book}}: CS1 maint: multiple names: authors list (link)
  7. 1 2 3 Connell, Shaun (March 21, 2012). "How to Build an Automatic, Fail-Proof Portfolio". GuruFocus.
  8. ↑ Tazner, Andrew (Dec 2008). "Best Funds for Rough Seas". Kiplinger's.
  9. ↑ Grant, Tim (February 17, 2010). "Spinning Cash Into Gold". Pittsburgh Post-Gazette.
  10. ↑ Roy, Debarati (August 1, 2012). "Gold forecasters splitting opinions". Bloomberg News.
  11. ↑ Unknown author (September 2012). "Simple vs. complicated portfolios;". Consumer Reports Money Adviser.{{cite news}}: |last= has generic name (help)
  12. ↑ Nguyen, Pham-Duy (May 8, 2012). "Europe's crisis lifts gold to near record; Silver jumps". Bloomberg News.
  13. ↑ Connell, Shaun (March 24, 2012). "Permanent Portfolio ETF?". GuruFocus.
  14. ↑ Prince, Michael (June 2006). "Asset Potpourri". Kiplinger's. p. 46. Retrieved January 25, 2013.
  15. ↑ Carrick, Rob (July 23, 2010). "A 'permanent' solution to your investment worries". Globe and Mail.
  16. ↑ Unknown author (Sep 2006). "Hybrid Funds". Kiplinger's. p. 46.{{cite news}}: |last= has generic name (help)
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