Permanent Fund’s Cuggino Calls His Offering ‘Flexible Choice’ for Advisors

Mutual fund invests in six different asset classes, including gold and Treasuries

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:                

  1. Gold:                                         20%
  2. Silver:                                        5%
  3. Swiss Franc assets:                 10%                
  4. U.S. & foreign real estate and
    natural resource stocks:         15%                
  5. Aggressive growth stocks:      15%                
  6. 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.”

Reprints Discuss this story
This is where the comments go.