PORTFOLIO SPOTLIGHT
Under The Hood
Upon closer examination , some of the six asset classes are a little more than what meets the eye . For example , U . S . dollar assets include cash , cash equivalents and investment-grade debt instruments , including U . S . Treasury bills , notes and bonds . The category also includes corporate bonds .
The Swiss franc assets category comprises demand deposits of Swiss francs , Swiss government bonds and other Swiss government securities . The fixed income generated by the fund comes from these two categories .
The portfolio ’ s equity portion comes in two varieties . One part centers on commodities , materials and real estate , or what Cuggino describes as the raw materials of economic activity . The fund ’ s
Portfolio Statistics
Number Of Holdings 178 Median Mkt . Cap
$ 84.84 billion P / E Ratio 21.83x Std . Dev Fund / Benchmark * 10.27 / 12.26 Turnover Ratio 15.26 % Net Expense Ratio 0.82 %
* 3 Year . Portfolio stats as of 9 / 30 / 24 . Turnover ratio as 1 / 31 / 24 . Expense ratio figures are for the institutional share class . Sources : Permanent Portfolio Family of Funds , Morningstar .
Manager Michael Cuggino Age 61
Professional Background He has served as president and portfolio manager of the Permanent Portfolio Family of Funds since his investment advisory firm , Pacific Heights Asset Management LLC , began managing the company ’ s four portfolios on May 1 , 2003 . He has been the president and CEO of Pacific Heights since its founding in 2002 . He previously served in various accounting , auditing and taxation capacities at Ernst & Young LLP and one of its predecessor firms , Arthur Young & Company .
Outside Interests Spending time with family and being heavily involved in the lives of his three children . He enjoys hiking , skiing , and rollerblading when time permits , and is an avid architecture , art and design enthusiast .
ADVISOR PHOTOGRAPH COURTESY OF PERMANENT PORTFOLIO FAMILY OF FUNDS
recent equity holdings in natural resources have included mining company Freeport-McMoRan and energy giants Chevron and Exxon Mobil . Real estaterelated stocks have included Texas Pacific Land Corp . and Prologis .
The growth-stock sleeve has recently been led by positions in Nvidia and Meta Platforms .
As for the precious metals in the fund ’ s portfolio , its gold and silver are both held in bullion and bullion-type coins . Together , they make up one-quarter of the Permanent Portfolio ’ s target weighting .
Gold ’ s purported non-correlation attributes are well known . It has long been a popular hedge against inflation and the potential risks posed by currency fiat systems . It is used more as an alternative currency or for personal use than as a raw material for manufacturing and industrial production . Plus , it ’ s owned by central banks for currency support .
Silver , which is the portfolio ’ s smallest target allocation , also enjoys both currency and monetary uses , but it plays a further important role as an industrial metal . “ It ’ s like a chameleon , because at times it trades like an industrial commodity and at other times it trades like a store of value , while at other times it trades in between ,” Cuggino says . He adds that silver could benefit from its crucial role in green energy production , particularly with solar panels .
Category Conundrum
Balanced funds typically mix stocks , bonds and cash , and their portfolio managers often tactically jump around depending on how they feel about macroeconomic conditions .
Cuggino contends that his fund offers investors a more well-rounded take on the balanced portfolio . “ Our model is a little more comprehensive than most . Our idea was to have dedicated exposure to these six asset classes at all times at some level , and that over time the positive performing aspects of the portfolio will outweigh the negative .
“ While some of these individual asset classes might be volatile ,” he adds , “ that volatility is mitigated by being in a portfolio of other assets that may not have the same volatility risk in the same direction at any given time . That tends to mute the overall volatility of the portfolio .”
The volatility-dampening approach also tends to produce category-beating returns . Fund research company Lipper this year named the Permanent Portfolio ’ s investment share class as the best alternative global macro fund during the past three and five years . And Morningstar placed the fund in the top quartile in its moderate-allocation category during the past three years ( when it was the second-best fund overall ) and during the past five years ( when it was the fifth-best performing fund ).
But here ’ s the rub : The fund doesn ’ t belong in the moderate-allocation category . At least that ’ s Cuggino ’ s take . As defined by Morningstar , this category includes portfolios that typically have 50 % to 70 % of their assets in equities and the remainder in fixed income and cash .
Cuggino says his fund ’ s 30 % target weighting in equities doesn ’ t fit that profile . Instead , he believes Lipper ’ s placement of the fund in the global macro category is more accurate .
“ We ’ ve been called a hedge-fundlike mutual fund or a liquid alternative ,”
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44 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2024 WWW . FA-MAG . COM