Portfolio manager Michael Cuggino (left) has been involved with the Permanent Portfolio (PRPFX) mutual fund since 1985, serving as auditor of the fund, treasurer, even chief compliance officer for a short period of time before becoming president in 2003. The five-star Morningstar fund, founded in 1982, is unique in several ways, and has attracted $16 billion in assets, much of that from advisors.
The no-load, low-beta fund invests in six different asset classes, Cuggino says, making it a “flexible choice” for advisors who want to allocate some portion of their clients’ assets to an absolute return-like vehicle without worry “about the machinations of the daily market.”
The six classes, with the percentage they represent of the portfolio, are:
- Gold: 20%
- Silver: 5%
- Swiss Franc assets: 10%
- U.S. & foreign real estate and
natural resource stocks: 15%
- Aggressive growth stocks: 15%
- U.S. T-bills, bonds & other
USD assets: 35%
Since, Cuggino says, “human beings are not good about predicting the future,” the fund sticks to its allocation regardless of where the market is heading. As of year-end 2011, PRPFX’s largest holding was gold coins, at 13.8%, followed by 7% in cash and 5.3% in gold bullion.
The fund has posted a 6.8% average annual return since its inception in December 1982, a 2.13% return in 2011, and 19% returns–all before taxes–in 2009 and 2010, with a current net expense ratio of 0.77%, a turnover rate of 9.1%. Cuggino says he is focusing on after-tax returns for shareholders.
As for advisors, Cuggino noted that the fund industry, and his own suite of funds (Permanent also has a short-term Treasury portfolio (PRTBX); a “Versatile Bond Portfolio (PRVBX) and an aggressive growth fund (PAGRX), is now very reliant on intermediaries. No firm grows large now without advisors.”