Anyone Familiar with Permanent Portfolio (PRPFX) Fund?

[Achiever51]

Curious to know if anyone is familiar with PRPFX? Its expense ratio is 1.35% -- but I noted that in this recent correction, PRPFX is only down 0.35%. Any insights? (Not that I'm running scared or anything, but I'm keeping my eyes open........)

http://permanentportfoliofunds.com/pdfs/perm/Permanent_033107.pdf

From their website:


Permanent Portfolio

Designed to provide growth at low risk, the primary goal of Permanent Portfolio is to preserve and increase the real long-term purchasing power of each shareholder’s investment, regardless of economic climate.
To accomplish this goal, the fund employs a time tested investment strategy of categorical diversification. Permanent Portfolio’s investment categories have been chosen and weighted with the goal of providing downside protection in all foreseeable economic conditions. For over 24 years, this strategy has not wavered despite significant market fluctuations.

The six investment categories and main investments for Permanent Portfolio include:

GOLD: Bullion and coins held in major banks and with accredited commodity exchange depositories. Gold is expected to profit from inflation, especially runaway inflation.
SILVER: Bullion and coins held in the same form as gold. Silver is expected to profit from inflation or a soft landing, and possibly gain during runaway inflation.
SWISS FRANC ASSETS: Current and call accounts at Swiss and non-Swiss banks, and Swiss government bonds. The Swiss franc is expected to profit from inflation, especially runaway inflation.
STOCKS OF U.S. AND FOREIGN REAL ESTATE AND NATURAL RESOURCE COMPANIES: Stocks of companies whose assets should allow them to appreciate or depreciate in much the same manner as real estate and natural resources. These stocks are much more liquid than real estate and natural resources. They are expected to profit from continued inflation.
AGGRESSIVE GROWTH STOCKS: Common stocks and stock warrants that tend to move further, in either direction, than the general stock market. Such stocks are intended to allow Permanent Portfolio to have a stake in any extended bull stock market but to do so with a limited risk to the overall Portfolio. Because all the Portfolio’s stocks are purchased for cash, without the use of margin, they can never lose more than is invested in them no matter what the future brings. And they are in a position to potentially profit dramatically if prosperity continues. They may hold much of their purchasing power during runaway inflation.
U.S. TREASURY BILLS, BONDS & OTHER DOLLAR ASSETS: Short-term securities (one year or less to maturity) issued or guaranteed by the U.S. government or its agencies. These investments provide liquidity and stability, and their yields tend to match the rate of inflation closely. Long-term bonds (as long as 30 years to maturity) that may profit greatly if a deflation or soft landing caused interest rates to drop from today’s levels to the level of 2% to 3% that normally has prevailed during non-inflationary periods. Because a deflation would cause widespread defaults on lower-grade bonds, only long-term bonds issued or guaranteed by the U.S. government or its agencies are held by the Portfolio.

​

 

[jIMOh]

YES- it is on my watchlist.

I have a well diversified T Rowe Price Portfolio of about 92% equity and 8% foreign bonds right now, about 30 years from RE and 20 years from FIRE.

I am looking to put taxable investments into PRFPX over next several years once 401k and Roth is maxed out (if extra money exists).

I might suggest checking out fund alarm. That is where I learned of fund and several their already own it.

 

[Achiever51]

Thanks for the fund alarm tip -- will follow up. Looks like an interesting fund.

 

[cute fuzzy bunny]

Basically a fund that went nowhere for most of its existence until it shifted into a higher equity component. They made a few good [-]guesses[/-] timing calls.

The s&p 500 stomped it into the ground over the last 20 years, although while severely underperforming the s&p, this fund did have a lot less volatility. Which is sort of like saying that while the knocked out fighter spent a long time on the canvas, his breathing was regular.

Vanguards balanced index fund performed similarly over the same ~20 year time period, but gained significant ground due to far lower costs.

Both the S&P 500 and stodgy old VBINX had significantly better tax efficiency throughout the same period.

 

[Ed_The_Gypsy]

Harken to the voice of the bunny. Be very wary of managed funds.

 

[mathjak107]

extremely high fund expenses vs return. from what i read fund manger barely has any of his own money in the fund

 

[jIMOh]

whether the fund manager has any of his money in the fund or not should not be deciding factor... VFINX has a fund manager listed, yet I don't here people trying to figure out if (s)he has any money in the fund.

and not all managed funds are bad.

This fund in particular is a key diversifier. You could not find a "swiss franc" index, or some index which mixes swiss francs, with treasuries, with gold/silver and other securities.

You could be well diversified with stocks and bonds... this fund can take that diversification to a new level.

 

[cute fuzzy bunny]

I like my diversifiers to actually do something different than the rest of my portfolio at certain points.

I dont define "something different" as going sideways for 15 years.

The bottom line is that this fund, long term, is a dog. Its had a hot couple of years because it happened to hold a few assets that all got hot at the same time.

That gets people excited, due to that funny thing that makes people want to buy dollars for a buck and a half and sell them when they're 75 cents.

But I guess you never know what a funds gonna do. And I guess if you've sliced your assets into 10-12 buckets and need more...

 

[FinanceDude]

Basically a fund that went nowhere for most of its existence until it shifted into a higher equity component. They made a few good [-]guesses[/-] timing calls.

The s&p 500 stomped it into the ground over the last 20 years, although while severely underperforming the s&p, this fund did have a lot less volatility. Which is sort of like saying that while the knocked out fighter spent a long time on the canvas, his breathing was regular.

Vanguards balanced index fund performed similarly over the same ~20 year time period, but gained significant ground due to far lower costs.

Both the S&P 500 and stodgy old VBINX had significantly better tax efficiency throughout the same period.

So beta in a portfolio doesn't matter? That's good to know, thanks for the tip..........

 

[cute fuzzy bunny]

Lowering your beta is a great thing. I sort of like doing it with investments that produce a return. Ones that did nothing and then had a hot run just arent that interesting.

So your advice to your customers would be "buy this, it might not go anywhere for 15 years, and it just ran up so its more than fully valued...but gosh the beta is low!" ?

You're right, i'm a fool. I invest to make money. Not to meet a set of criteria.

 

[jIMOh]

Basically a fund that went nowhere for most of its existence until it shifted into a higher equity component. They made a few good [-]guesses[/-] timing calls.

The s&p 500 stomped it into the ground over the last 20 years, although while severely underperforming the s&p, this fund did have a lot less volatility. Which is sort of like saying that while the knocked out fighter spent a long time on the canvas, his breathing was regular.

Vanguards balanced index fund performed similarly over the same ~20 year time period, but gained significant ground due to far lower costs.

Both the S&P 500 and stodgy old VBINX had significantly better tax efficiency throughout the same period.

I don't think measuring it's performance relative to S&P 500 is a good measure. I would compare it more to a bond fund, to a moderate allocation fund, or just to an inflation index.

It's stated goal is to maintain the purchasing power of the money invested, and grow it, if possible.

 

[cute fuzzy bunny]

The only problem is that it doesnt meet its stated goal. Its returns after taxes, fees and adjusted for the CPI is negative. And it was severely negative up until the last 2 years.

Its maintaining its price well enough, but not the buying power.

I'd rather own TIPS. And I think we all know how I feel about those.

 

[FinanceDude]

Lowering your beta is a great thing. I sort of like doing it with investments that produce a return. Ones that did nothing and then had a hot run just arent that interesting.

So your advice to your customers would be "buy this, it might not go anywhere for 15 years, and it just ran up so its more than fully valued...but gosh the beta is low!" ?

You're right, i'm a fool. I invest to make money. Not to meet a set of criteria.

I'm not a fan of funds like this anyway, just mentioning the S&P 500 has a beta of 1.0, not that anyone cares................

 

[pedorrero]

I think Cute Fuzzy Bunny has done a better job of criticising the PP fund, and pretty informed at that. I don't dispute his (or anyone else's) figures here. I'm too lazy for that! I am, however, a Harry Browne fan and apologist. He was the originator of the "Permanent Portfolio" concept back in late 1970s/early 80s. Explained in several of his books, perhaps best in my favourite "Why the Best Laid Investment Plans Usually Go Wrong" from about 1987. Browne, who died in 2006 I think, never drastically changed from this "PP" idea in his last two decades of life, as far as I've read. His claim (in the 1989 revision of his book) was that you could expect about 5% per year real return from his PP concept. Overall, I think the PP mutual fund(s) have done pretty well. Not as well as the stock market...but if you read his book, you'll know that PP is intended to be a balanced fund and not to be super-volatile. The mutual funds, as offered, are not the "pure" PP concept (but neither were his earlier proposed portfolios.)

-- Pedorrero, who still doesn't have 25% of his net assets in gold bullion, but the portion he does have has done really well since 2004. Please, no questions about 1985-1999....

 

[cute fuzzy bunny]

Hey, dont get me wrong...I like the guy too and I know what he tried to do with this fund.

But bear in mind he put this portfolio together with the investing principles of the pre 1980's investing market...high lasting inflation (which we havent seen since this fund was formed), gold working as a great inflation hedge (which it hasnt been since this fund was formed), and other elements that were supposed to offset inflation and volatility.

Its done great on the volatility front. No sharp drops. But had gold not taken off over the last few years, nobody would be particularly intrigued by this fund.

Its a different world.

I just wanted to show what it looks like in comparison to other alternatives...I think its interesting as a diversifier but historically hasnt been that effective.

If you want a stable value fund that holds its own against inflation, gives growth and doesnt have much volatility, look at this chart of investment growth of the permanent portfolio fund vs my fave in this sector, vanguards wellesley. ER of .14% in admiral shares, and its kicked the permanent portfolios ass without showing much more volatility.

 

[mathjak107]

the problem with the fund is its geared to strong economic cycles such as we used to get during the normal business cycles. those days seem to be gone as we have more of a rolling regional or sector business cycle now rather than everything together at once.

i loved harry browne and followed his 4 part perm porfolio right up to the late 80's and it worked fine. but now its more a high inflation fund and needs some pretty high numbers to make it work.

the origional perm portfolio concept was 4 equal parts in long term treasurys, gold, cash and equities. the idea was under the right enviornment each catagory could only fall to zero , while the others could double, triple, etc. but it takes strong trends to make that happen, and we just dont see that anymore

 

[jIMOh]

Hey, dont get me wrong...I like the guy too and I know what he tried to do with this fund.

But bear in mind he put this portfolio together with the investing principles of the pre 1980's investing market...high lasting inflation (which we havent seen since this fund was formed), gold working as a great inflation hedge (which it hasnt been since this fund was formed), and other elements that were supposed to offset inflation and volatility.

Its done great on the volatility front. No sharp drops. But had gold not taken off over the last few years, nobody would be particularly intrigued by this fund.

Its a different world.

I just wanted to show what it looks like in comparison to other alternatives...I think its interesting as a diversifier but historically hasnt been that effective.

If you want a stable value fund that holds its own against inflation, gives growth and doesnt have much volatility, look at this chart of investment growth of the permanent portfolio fund vs my fave in this sector, vanguards wellesley. ER of .14% in admiral shares, and its kicked the permanent portfolios ass without showing much more volatility.

from my standpoint, a fund like Wellesley just tilts the equity/bond positions of the overall portfolio.

From my standpoint, I am looking at PP more from standpoint of "I don't own too much of what it holds".

So for some stability of returns, I am considering this fund as a place to park taxable money until I have a better idea what to do with it. Might be 10% of my overall position... and gives me exposure to foreign currencies, gold and silver.

If high inflation hits, this fund should work well. If market continues to do well, it will underperform traditional equity funds/ balanced funds, but still yield a positive real return.

This fund is as close to buying commodities as I will approach.

 

[cute fuzzy bunny]

Then I'm confused, because there seems to be some jumping back and forth.

Is it a great fund for buying additional diversifying asset classes that for most of the past 25 years havent done anything interesting or is it a great fund for maintaining the buying power of the money invested, which it hasnt successfully done either?

 

[jIMOh]

Then I'm confused, because there seems to be some jumping back and forth.

Is it a great fund for buying additional diversifying asset classes that for most of the past 25 years havent done anything interesting or is it a great fund for maintaining the buying power of the money invested, which it hasnt successfully done either?

buying additional asset classes and maintaining buying power of the money invested are not mutually exclusive, they each are solutions to similar and different problems.

Problem 1: Portfolio may not have exposure to precious metals (gold/silver)
solution- PP could provide this exposure

Problem 2: Portfolio may not have exposure to foreign currencies
solution: PP could provide this exposure

Problem 3: In times of high inflation, an equity/bond based portfolio may not give enough inflation protection to maintain purchasing power of money invested.
solution PP could improve this protection

Each of the above problems can be solved more than one way.

Problem 1 could be solved with ETF's, equity investments in gold/silver mining companies or probably a few other ways (what is YOUR solution?).

Problem 2 could be solved with investments in foreign equity funds, foreign bond funds, similar ETFs, and maybe a few other ways. What is your solution?

issues with solutions to problem 2 may include taking on too much risk to any 1 country. Something to think about.

Problem 3 does not have many solutions (keep investing, work longer, is probably as good a solution as any). The real return of TIPs is quite low, and that might be primary viable alternative.

Equities keep up with moderate inflation. What keeps up with high inflation?

 

[cute fuzzy bunny]

I guess my point is that these "fine slice" diversifiers dont seem to be providing much diversity anymore. Except for a recent runup that doesnt seem correlated to anything, precious metals havent done anything other than go sideways.

Foreign currencies also seem to be a solution looking for a problem. Not seeing any movements on swiss francs that was correlated with anything interesting.

I guess I also just dont worry about periods of high inflation because there's only really been one and it was 30 years ago. And during that period, equities didnt do too badly and Wellesley actually held its own.

My overall solution is that I think a lot of these 'diversifiers' worked when few people had access to them, they were out of the publics perspective, and not a heck of a lot of money moved through them. I dont think gold, silver, francs, reits or commodities - as investment items - will behave in any predictable manner in the future. Many ran up when people poured cash into them because the newfangled asset allocation schemes told them to, and they're far more transparent and investible than they used to be. Way more liquid.

But everyone gets to have their own opinion...the data just doesnt seem to say anything productive about what to expect from this fund.

 

[howieb]

I bought some of this fund primarily because of its low .30 R-squared. I was further influenced to buy when I saw that it offered exposure to asset classes not much present in my portfolio and its potential to do well in times of high inflation. A five-star Morningstar rating for three, five and ten years cinched the deal.

Along the same lines, I have put my toes in the water with the unproven Fidelity Strategic Real Return Fund.

If nothing else, it will be interesting to follow these in contrast to the domestic equity funds that form the bulk of my portfolio.

 

[Indiana Slim]

20/20 hindsight

Occasionally I like to post to old threads to follow up on people's assertions and assumptions.

Since the last post in this thread (Oct. 2007) PRPFX is up 32%, while the S&P 500 is down 14%.

Glad I started buying PRPFX right about October of '07.

 

[DblDoc]

Sniff, sniff...

Smells like troll...

DD

 

[Bestwifeever]

Occasionally I like to post to old threads to follow up on people's assertions and assumptions.

Since the last post in this thread (Oct. 2007) PRPFX is up 32%, while the S&P 500 is down 14%.

Glad I started buying PRPFX right about October of '07.

Ummm... April Fool? Since you just registered here on e-r.org today, where are these old threads that you've posted to?

 

[nun]

Occasionally I like to post to old threads to follow up on people's assertions and assumptions.

Since the last post in this thread (Oct. 2007) PRPFX is up 32%, while the S&P 500 is down 14%.

Glad I started buying PRPFX right about October of '07.

sniff sniff.......smells like market timing.