The Independent Investor: Permanent Portfolio Fund
 |
Permanent Portfolio Family of Funds is a San Francisco-based mutual fund family founded in 1982. Its flagship fund, the Permanent Portfolio Fund, with $4.8 billion under management, has been ranked five stars by Morningstar, the mutual fund rating service, over 10, five, three and one years.
It is considered a global conservative allocation fund, sometimes called a balanced fund. The fund invests a fixed percentage of its net assets in gold, silver, Swiss Franc assets, U.S. stocks, foreign real estate and natural resource stocks, aggressive growth stocks and dollar assets such as U.S. Treasury bonds and short-term corporate bonds.
"If you look at our asset classes on their own, they could be considered quite speculative," says Michael Cuggino, the funds' portfolio manager, "but taken together the six asset classes are relatively non-correlated and allows the portfolio to maintain a stable return."
Investors have been rewarded over the years with that strategy since the fund has generated a 6.5 percent rate of return since inception. It lost less than most last year (down 8.4 percent) and is up 17 percent as of Oct. 9 of this year, according to Morningstar.
Cuggino is a certified public accountant and like his fund, is conservative with a balanced outlook on investments. He has 23 years of professional experience, 17 of which has been with the Permanent Portfolio. Traditionally his fund allocates 20 percent of its assets to gold, 5 percent to silver, 35 percent to U.S. Treasuries and corporate bonds, 15% to U.S. aggressive growth stocks, 10% to Swiss Franc assets and 15% to real estate and natural resource stocks.
"We have some leeway on those targets with a 10 percent range above and below those levels. We re-balance when things get too far out of wack, but re-balancing is a necessary evil for us because of the tax implications, so we manage it."
Given the recent moves in both gold and silver, I asked him about his precious metals holdings. Is he in stocks, ETFs or futures?
"We can hold gold and silver in a number of ways, but we found holding bullion directly is easily understood by our investors and it allows us direct ownership."
Cuggino's view of the market is also instructive.
"Our fund is actually the antithesis of forecasting," he said. "Saying that, however, I think commodity prices in general will continue to go up given the increasing amount of liquidity under way worldwide. Oil, metals, agriculture, gold, silver; commodities across the board will go up as the dollar weakens and world wide economies re-flate."
As for the U.S. market and stocks in general, he has a positive attitude.
"My sense is we have room to go higher. I still like the communication and energy space, specifically we like Freeport-McMoran and tech companies like Hewlett Packard, which derives more than 50 percent of its revenues from overseas markets."
On the economy, he sees the cup as half full.
"Economic fundamentals are improving; I see expansion of multiples and higher stock prices based on earnings growth, although the strength of that will vary from sector to sector."
He does see some significant head winds ahead so he is a bit wary right here in terms of fiscal policy, easy money and continued rising unemployment.
The fund's symbol is PRPFX and its expense ratio is 0.84%, according to the fund's prospectus. Investors will also be pleased to note that there are no front or back end loads on the Permanent Portfolio Fund or the three other Permanent funds - a versatile bond, a Treasury bill and an aggressive growth fund.
Cuggino believes his fund is best suited for the conservative investor. One who is satisfied with "singles, and doubles with not many homeruns but no strike outs either."
Given the recent volatility in the markets, it sounds like a good, sensible strategy to me especially if you are approaching retirement.
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing more than $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at
1-888-232-6072 (toll free) or e-mail him at wschmick@fairpoint.net Visit www.afewdollarsmore.com for more of Bill’s insights.You can also tune in to Bill's "@theMarket" show on Vox radio every Friday morning at 8:35, 9:35 and 11:05 or on WBRK at 4:05 every weekday afternoon.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM.
