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Safeguarding Your Money (financial assets) in Uncertain Times...PRPFX?
Maybe its not easy or possible to follow the fund's strategy precisely but its most certainly possibly to follow Harry Browne's basic Permanent Portfolio strategy at a much lower cost. I tend to think there's a time and a place for almost everything and I have no doubt the risk parity concepts will have their day. Grantham thinks that's somewhere between 6 months and 2 years in the future so I'm not sure I'd want to go there quite yet but I probably have a higher risk tolerance than many people.
Oops. Sorry @bee. I thought this was from Ted and initially blasted it. (He who giveth shall receiveth.)
Torpedo recalled.
Apologies @Ted also. I need to look before I leap.
@bee raises an interesting question re PRPFX. And I listened to all 15 minutes of the video expecting the gent would eventually get around to that fund. But I see no reference to PRPFX or its multi-asset investment approach in the linked video. Perhaps a different video was intended?
What this is is a lopsided pitch for gold using scare tactics. I won’t dispute that the gentleman injects some real financial issues into his pitch (excess liquidity, high valuations, high debt, etc.). If folks have takes on those issues I’d be most interested in hearing their thoughts. (And a lot of his pitch is taken from John Hussman’s playbook.) But the presentation seems very lopsided and designed mainly to spook people into owning gold.
Everybody has their own take on PRPFX. Depends on your temperament, philosophy, life experiences and a whole lot of other factors. Those who read my musings must note I’m pretty risk averse. So I look for every possible way to diversify. Having a small chunk of this fund (10-15% of total) is just one aspect of that diversification.
I’ve never viewed PRPFX as something you buy or sell depending on your outlook for the economy or the stock market. Actually, I’d tend to view it more as an all weather fund, suitable at anytime. A good fund for those who agree with the “TED” series speaker’s doomsday prophecy would be HSGFX. A better choice IMHO than loading up on gold.
PRPFX apparently has been "bothered" by more than gold pricing. Too many internal holdings to look closer, as I don't get paid very much for this type of work.
Chart looking back to November, 2004 for PRPFX and GLD.
PRPFX apparently has been "bothered" by more than gold pricing. Too many internal holdings to look closer, as I don't get paid very much for this type of work.
@Catch22, The fund holds a significant amount in short term paper and treasury bonds. Both have yielded near nothing for many years. If you throw a lot of 2% yielding paper into a portfolio the net result will be lower than it might be with 100% in some riskier asset. No?
Gold is in my opinion very risky. In my own lifetime it’s varried in price between $35 and $1600. It’s currently around $1300. Doesn’t sound like something I’d throw 100% of my assets into - even if I believed it was going to go higher. Just too d*** risky.
Hi @hank I added a few more bond types for the time period. I will add too, that yes, as you noted; bond yields have continued to trend downward since the market melt; but this has caused the price to increase and offer capital appreciation. So, if management was playing the game to benefit, there should have been gains in this area at various periods. 'Course, I know nothing about their trading habits.
One of the things that might have caused some issues was I think they had an enormous inflow of assets, probably during the credit crisis, and then most of those assets left afterwards.
I also know the fund has its own somewhat more sophisticated take on what Harry Browne laid out as his Permanent Portfolio and unfortunately it hasn't helped them. If you compare the performance of Browne's 25% each equities, long term treasuries, gold and cash to PRPFX, Browne has beaten the fund by 100 basis points annually since inception even though cash has effectively been earning nothing for almost 10 years and Browne managed that excess return with a lot less volatility, a much lower max drawdown, a better worst calendar year and, of course, far better risk adjusted returns.
If I could get people to give me $20MM every year for a management fee I'm sure I could come up with a worse version of Ray Dalio's All Season's Portfolio and that's just what they make on the paltry $2.5BN they still have in the fund. Five years ago they had $17BN but they were charging less so they probably only got $119MM that year. I really chose the wrong career!
@LLJB, Investors have to weather the risk of negative returns, but management fee never do. You make a good point...management fees which are spread across all investors, but concentrated into one or a few management teams...are tremendously profitable and totally risk free when these managers have no skin in the game.
Fund flows bother me a lot. They wreck havoc on a lot of funds. Look what happened to MFLDX as “investors” fled. And I’m aware PRPFX has suffered due to the fund’s huge investor exodus after gold cooled. Heck, management discussed the rapid decline in asset base in their fund reports about 3 years back and considered altering the fee structure (though I don’t recall in what manner) as a consequence.
Umm ... I’m a little sensitive on this point being a docile, long term, buy and hold type. And would prefer the “hot money” stay away from the funds I own. PRPFX is not a gold fund. Folks who want a gold fund should buy one.
Here’s how PRPFX invests:
Gold 20%
Silver 5%
Swiss franc assets 10%
Real estate / natural resource stocks 15%
Aggressive growth stocks 15%
Dollar assets 35%*
Total 100%
* Includes U.S. Treasury Bonds
Where I have a (I hope friendly) disagreement with @bee is in posting the fella with the seedy suit and bad hairpiece who’s using scare tactics to promote buying of gold and than somehow trying to link what he’s peddling to the Permanent Portfolio Fund. I see no connection whatsoever between his snake-oil pitch for gold and how PRPFX invests.
I’ve had a mild (long running) disagreement with @LLJB who believes one should buy the assets, originally promoted by author Harry Brown, directly rather than paying Michael Cuggino a higher fee to do that for you. I agree - except that I’m not aware of a single poster ever who claimed to be doing that. I’m lazy. The thought of having to buy, transport, store and insure physical bullion, buy and sell stock ETFs, play in the international currency arena and do the regular record keeping (including taxes related to international currency trades) is daunting. Saying the fees are high in no way addresses the issue of diversifying across asset classes, which is what the fund’s about.
Than there’s David Snowball’s very well documented commentary (roughly a decade ago) analyzing Cuggino’s returns across asset classes and finding the performance lacking. I can’t argue with that. I doubt Cuggino excels as a stock picker. If that’s what you want, invest in a proven equity growth fund. And his dismal results for his short term Treasury fund are easily retreivable. Again, if you want a top income manager, invest with one.
All this said, PRPFX does invest across multiple asset categories. If you like those categories as a diversification tool and don’t want to go through the trouble of investing individually in each asset class, than it’s a decent fund.
I’ve had a mild (long running) disagreement with @LLJB who believes one should buy the assets, originally promoted by author Harry Brown, directly rather than paying Michael Cuggino a higher fee to do that for you. I agree - except that I’m not aware of a single poster ever who claimed to be doing that. I’m lazy. The thought of having to buy, transport, store and insure physical bullion, buy and sell stock ETFs, play in the international currency arena and do the regular record keeping (including taxes related to international currency trades) is daunting. Saying the fees are high in no way addresses the issue of diversifying across asset classes, which is what the fund’s about.
@hank, thank you for saying "mild", especially since I'm not sure we disagree as much as you think and because I far prefer sharing my opinion and letting everyone else decide what's best for them than attacking the choices people make because I think my opinion would somehow suit them better.
Anyway, I wouldn't suggest buying the assets that PRPFX holds in any way. It would be a pain as you highlighted and you'd always be months behind since they only have to be transparent once each quarter. My suggestion would simply be to allocate 25% each to equities (VTI), long-term Treasury Bonds (TLT), gold (I prefer IAU) and cash. Someone could certainly choose different etfs in order to have some foreign and/or emerging markets equities or to have shorter duration bonds if they have opinions about the direction of interest rates but that's a question of personal preference, confidence, goals and willingness to keep records. Speaking of record keeping, I think for years now brokers are required to report the cost basis of your transactions so the only real need to keep records is if you prefer to verify the accuracy of your 1099, which I do. I would rebalance once each year because the mutual fund must rebalance at least that often and your expense ratio using the etfs I mentioned would be 0.11% compared to the current 0.82% for PRPFX.
Just as a what if I also tried to duplicate the PRPFX allocations and back test the performance. I used IAU for gold, SIVR for silver, EWL for the Swiss stock market, IYR and IGE (7.5% each) for real estate and natural resources, RPG for aggressive growth stocks, TLT at 25% for long term treasuries and VTI at 10% for the remainder of dollar assets. The physical silver etf only became available in Aug 2009, I couldn't find anything else older and I didn't want miners, but my attempt returned 9.83% annually with a max drawdown of 8.79% and a worst calendar year of -4.49% while PRPFX returned 5.76% annually with a max drawdown of 12.52% and a worst year of -6.58%. I only rebalanced once per year which I'm sure made some of the difference and my expense ratio was 0.28%, which also helped. My use of IGE for natural resources probably isn't how they do things either, its sort of like buying physical gold vs. the gold miners, but it was simple.
Hindsight is always 20/20 so I'm certainly not trying to suggest my options are somehow better or that they will be better in the future, but if someone's interested in a risk parity approach then I think its worth considering the options. In fact, if someone wanted life made easy, people have created motifs at Motif Investing where you can follow the Permanent Portfolio or Ray Dalio's All Seasons Portfolio as a basket of stocks, something like a mutual fund without all the compliance requirements I guess. I've never used Motif so I can't say anything good or bad about it, just that I'm aware it exists and how it basically works.
It’s quite easy for me to check the fund’s recent performance, since I converted 100% of my holdings to a Roth on 1/04/16. As of today’s close (1/11/18) the fund has generated a 25% gain in just over 2 years. Coming right after a conversion, I couldn’t be happier. I often noted my trades / activities in the buying and selling threads in the past. If anybody cares to check the January 2016 pages they should come across that conversion date.
You are correct that the fund dropped off a cliff for a while. It was bound to happen. Hot money had poured in for several years as the fund’s (rather modest) gold and silver holdings propelled it higher than most other allocation funds. Folks seemed to feel they’d discovered a low risk way to make a lot of money fast. Of course, there is no such animal. When metals started backsliding (entirely predictable) these fly-by-night investors bailed enmass and moved on. It was at that time, with the price depressed, that I opened a small position in the fund and than averaged in over the next 2-3 years. -
I have owned PRPFX for going on 20 years. However, I do so considering it one of my core holdings. It's about 7% in each of three different accounts. I recognize that I could build it myself and do better but I'm lazy.
I do NOT see PRPFX as a substitute for gold or silver precious metals. Folks, you know me. I have been preaching for many years that everyone should have some small percentage of precious metals in their overall holdings: 3-10% depending upon your bent. More that this is always speculation.
That said, with some of these types of assets, you really have to go from asset allocation in an account to overall wealth allocation. Recall the Elder Baron R saying that to protect yourself though economic bad times, you should have 1/3 of your wealth in securities, 1/3 in real estate and 1/3 in rare art (define as you wish but it ain't Beanie Babies).
I would caution you folks to get some paper towels ready to wipe your screen before you run your own numbers.
If go to PortfolioVisualizer.com and run a backtest of a portfolio consisting of 1/3 SPY, 1/3 GLD, and 1/3 IEF (rebalanced quarterly), and plot it against a benchmark of PRPFX, the charts look virtually identical from Sept 2015 thru Dec 2017.
Same is true from Dec 2004 through April 2011.
But from May 2011 through Aug 2015, PRPFX underperformed SPY/GLD/IEF by 4.75% per year. Undoubtedly because it was overweight gold.
I am glad for PRPFX investors it seems to be back on track to providing diversified returns!
Thanks for the analysis. No doubt I caught a sweet-spot in early 2016.
Would never want to be an apologist for Michael Cuggino. I could probably make a good case for not owning his fund as well. But for some reason, PRPFX is disliked by many who’ve never owned it, and misunderstood by a great many others. Some mistakingly term it a gold fund.
I noted previously the deleterious effect massive inflows and outflows had on this fund. Can’t help wondering whether the “overweight gold” you reference was related to the metal’s stratospheric rise in value during that period. It roughly sextupled in value between ‘99 and 2011, rising from $300 to $1900. That’ll put you “overweight”. Certain to give any manager a headache.
Another thought: Did the massive inflows into PRPFX contribute to gold’s rise during that period? That’s something I think about a lot - the possibility that heavy inflows into a fund (or certain category of funds) might indirectly drive the valuations of the assets in which they invest. The elephant chasing his tail.
If you trend GLD and PRPFX, the 2 move in tandem. So, it could be argued PRPFX is a conservative way of owning gold, I think. I think you would own a fund like PRPFX for the same reason you would own a conservative balanced fund like maybe GLRBX, although over time I think a plain vanilla fund like GLRBX would have been a smoother and more lucrative ride. But in any case, it all comes down to being comfortable in how it fits your portfolio view.
What does that mean, PRPFX was "over-weight" gold? The weight within the portfolio doesn't change.
If you trend GLD and PRPFX, the 2 move in tandem. So, it could be argued PRPFX is a conservative way of owning gold, I think. I think you would own a fund like PRPFX for the same reason you would own a conservative balanced fund like maybe GLRBX, although over time I think a plain vanilla fund like GLRBX would have been a smoother and more lucrative ride. But in any case, it all comes down to being comfortable in how it fits your portfolio view.
What does that mean, PRPFX was "over-weight" gold? The weight within the portfolio doesn't change.
With a combined 25% benchmark weighting to gold and silver, PRPFX will respond more to price changes in those metals than most funds having little or no exposure. Metals tend to be wildly erratic “assets”, which explains your preference at one time for this fund over owning GLD or a dedicated p/m fund. A bit like adding some water to your single malt to dampen the effect. I placed assets in quotes because there was a good thread here about 5 years ago debating whether gold should even be considered a “financial asset”.
Sounds like you had a reasonably good experience with PRPFX and moved out when momentum reversed. As with any open-ended fund, heavy selling by shareholders over short periods can ding returns, hurting those who stay behind - but there’s no way that I know of to prevent them, and I've occasionally engaged in the same practice to lock in a quick gain.
Adding a volatile investment to an otherwise conservative fund will affect returns during both the up and down cycles. Hussman, for example, once held significant mining shares in HSTRX. On the surface it appeared a mild mannered income fund. But in 2007 it outpaced the competition with a near 13% gain; than lost 8.37% in 2013. Suspect you’ll find those numbers track the performance / underperformance of GLD. (If memory is correct, p/m shares represented near 10% of the fund at times,)
I’ll go out on a limb and say I like gold / miners at the moment. In part that’s because most everything else appears so expensive. That said, timing the metals is a fool’s errand and I have 0% confidence in my outlook. Consequently, I currently maintain only a “token” foothold in a dedicated p/m fund.
Re “Overweight” (First mentioned in this thread by @PBKCM): Unless a fund rebalances every day, rapidly rising prices for a particular asset might move that asset to a temporary overweight position relative to benchmark - until the manager rebalances. Don’t know how frequently PRPFX rebalances, but doubt it’s every day. So I’d expect that the fund went temporarily overweight gold for a stretch simply because it was appreciating much more rapidly than the fund’s other assets.
I did own PRPFX for a time and it did well when I held it. By the way, like you, I also owned HSGFX back then. I truly can't remember when I bought or when I sold PRPFX. I know I got out when gold started to drop. I did use Permanent Portfolio as a proxy gold fund. I think PP can be a long term holding for sure, but I also think there are other conservative allocation or balanced funds that will do better with less volatility.
Miners on the other hand, I lost money and they left a bitter taste. I remember when I first started coming to FundAlarm, Gold, precious metal-miners and pretty much all commodities were the darlings of the site. Oh, Asia was a big sector too. I remember people were big-time over weighting Asia because, "Asia was the future" meaning the U.S was not. That didn't work out well. I believe Junkster would call them group-think funds, but for a short while they did make money.
The thing is, I've given up trying to catch the hot sectors or time the market. I personally don't think gold over time is a good investment. Way to much volatility for the long term returns you will achieve. PM miners, hate-um. I remember drinking the kool-aid back in the day and lost money. That won't happen again. PM Miners is a timing investment in my mind. A risky one. Not a buy and hold. And what I'm saying is it doesn't work for me. Others may have had a profitable experience - if they knew when to get out.
I think I agree with everything you said there Mike. I’d just as soon play the tables in Vegas as own much gold. Hold it indirectly through several funds of course, but as far as dedicated p/m funds go - perhaps 1 or 2%. Don’t know how PRPFX gets away with it - but far less volatility than I’d expect for a fund with 25% in precious metals.
Yes - I did own both HSGFX and HSTRX for a few years in the 2000-2005 period. The latter was actually a pretty good fund and is the one I remember holding around 10% in gold and p/m shares.
Comments
Torpedo recalled.
Apologies @Ted also. I need to look before I leap.
@bee raises an interesting question re PRPFX. And I listened to all 15 minutes of the video expecting the gent would eventually get around to that fund. But I see no reference to PRPFX or its multi-asset investment approach in the linked video. Perhaps a different video was intended?
What this is is a lopsided pitch for gold using scare tactics. I won’t dispute that the gentleman injects some real financial issues into his pitch (excess liquidity, high valuations, high debt, etc.). If folks have takes on those issues I’d be most interested in hearing their thoughts. (And a lot of his pitch is taken from John Hussman’s playbook.) But the presentation seems very lopsided and designed mainly to spook people into owning gold.
Everybody has their own take on PRPFX. Depends on your temperament, philosophy, life experiences and a whole lot of other factors. Those who read my musings must note I’m pretty risk averse. So I look for every possible way to diversify. Having a small chunk of this fund (10-15% of total) is just one aspect of that diversification.
I’ve never viewed PRPFX as something you buy or sell depending on your outlook for the economy or the stock market. Actually, I’d tend to view it more as an all weather fund, suitable at anytime. A good fund for those who agree with the “TED” series speaker’s doomsday prophecy would be HSGFX. A better choice IMHO than loading up on gold.
Regards
Chart looking back to November, 2004 for PRPFX and GLD.
http://stockcharts.com/freecharts/perf.php?PRPFX,GLD&p=6&O=011000
I added a few more bond types for the time period.
I will add too, that yes, as you noted; bond yields have continued to trend downward since the market melt; but this has caused the price to increase and offer capital appreciation. So, if management was playing the game to benefit, there should have been gains in this area at various periods.
'Course, I know nothing about their trading habits.
http://stockcharts.com/freecharts/perf.php?PRPFX,GLD,EDV,IEF,SHY,LQD&p=6&O=011000
I also know the fund has its own somewhat more sophisticated take on what Harry Browne laid out as his Permanent Portfolio and unfortunately it hasn't helped them. If you compare the performance of Browne's 25% each equities, long term treasuries, gold and cash to PRPFX, Browne has beaten the fund by 100 basis points annually since inception even though cash has effectively been earning nothing for almost 10 years and Browne managed that excess return with a lot less volatility, a much lower max drawdown, a better worst calendar year and, of course, far better risk adjusted returns.
If I could get people to give me $20MM every year for a management fee I'm sure I could come up with a worse version of Ray Dalio's All Season's Portfolio and that's just what they make on the paltry $2.5BN they still have in the fund. Five years ago they had $17BN but they were charging less so they probably only got $119MM that year. I really chose the wrong career!
Umm ... I’m a little sensitive on this point being a docile, long term, buy and hold type. And would prefer the “hot money” stay away from the funds I own. PRPFX is not a gold fund. Folks who want a gold fund should buy one.
Here’s how PRPFX invests:
Gold 20%
Silver 5%
Swiss franc assets 10%
Real estate / natural resource stocks 15%
Aggressive growth stocks 15%
Dollar assets 35%*
Total 100%
* Includes U.S. Treasury Bonds
Where I have a (I hope friendly) disagreement with @bee is in posting the fella with the seedy suit and bad hairpiece who’s using scare tactics to promote buying of gold and than somehow trying to link what he’s peddling to the Permanent Portfolio Fund. I see no connection whatsoever between his snake-oil pitch for gold and how PRPFX invests.
I’ve had a mild (long running) disagreement with @LLJB who believes one should buy the assets, originally promoted by author Harry Brown, directly rather than paying Michael Cuggino a higher fee to do that for you. I agree - except that I’m not aware of a single poster ever who claimed to be doing that. I’m lazy. The thought of having to buy, transport, store and insure physical bullion, buy and sell stock ETFs, play in the international currency arena and do the regular record keeping (including taxes related to international currency trades) is daunting. Saying the fees are high in no way addresses the issue of diversifying across asset classes, which is what the fund’s about.
Than there’s David Snowball’s very well documented commentary (roughly a decade ago) analyzing Cuggino’s returns across asset classes and finding the performance lacking. I can’t argue with that. I doubt Cuggino excels as a stock picker. If that’s what you want, invest in a proven equity growth fund. And his dismal results for his short term Treasury fund are easily retreivable. Again, if you want a top income manager, invest with one.
All this said, PRPFX does invest across multiple asset categories. If you like those categories as a diversification tool and don’t want to go through the trouble of investing individually in each asset class, than it’s a decent fund.
Anyway, I wouldn't suggest buying the assets that PRPFX holds in any way. It would be a pain as you highlighted and you'd always be months behind since they only have to be transparent once each quarter. My suggestion would simply be to allocate 25% each to equities (VTI), long-term Treasury Bonds (TLT), gold (I prefer IAU) and cash. Someone could certainly choose different etfs in order to have some foreign and/or emerging markets equities or to have shorter duration bonds if they have opinions about the direction of interest rates but that's a question of personal preference, confidence, goals and willingness to keep records. Speaking of record keeping, I think for years now brokers are required to report the cost basis of your transactions so the only real need to keep records is if you prefer to verify the accuracy of your 1099, which I do. I would rebalance once each year because the mutual fund must rebalance at least that often and your expense ratio using the etfs I mentioned would be 0.11% compared to the current 0.82% for PRPFX.
Just as a what if I also tried to duplicate the PRPFX allocations and back test the performance. I used IAU for gold, SIVR for silver, EWL for the Swiss stock market, IYR and IGE (7.5% each) for real estate and natural resources, RPG for aggressive growth stocks, TLT at 25% for long term treasuries and VTI at 10% for the remainder of dollar assets. The physical silver etf only became available in Aug 2009, I couldn't find anything else older and I didn't want miners, but my attempt returned 9.83% annually with a max drawdown of 8.79% and a worst calendar year of -4.49% while PRPFX returned 5.76% annually with a max drawdown of 12.52% and a worst year of -6.58%. I only rebalanced once per year which I'm sure made some of the difference and my expense ratio was 0.28%, which also helped. My use of IGE for natural resources probably isn't how they do things either, its sort of like buying physical gold vs. the gold miners, but it was simple.
Hindsight is always 20/20 so I'm certainly not trying to suggest my options are somehow better or that they will be better in the future, but if someone's interested in a risk parity approach then I think its worth considering the options. In fact, if someone wanted life made easy, people have created motifs at Motif Investing where you can follow the Permanent Portfolio or Ray Dalio's All Seasons Portfolio as a basket of stocks, something like a mutual fund without all the compliance requirements I guess. I've never used Motif so I can't say anything good or bad about it, just that I'm aware it exists and how it basically works.
It’s quite easy for me to check the fund’s recent performance, since I converted 100% of my holdings to a Roth on 1/04/16. As of today’s close (1/11/18) the fund has generated a 25% gain in just over 2 years. Coming right after a conversion, I couldn’t be happier. I often noted my trades / activities in the buying and selling threads in the past. If anybody cares to check the January 2016 pages they should come across that conversion date.
You are correct that the fund dropped off a cliff for a while. It was bound to happen. Hot money had poured in for several years as the fund’s (rather modest) gold and silver holdings propelled it higher than most other allocation funds. Folks seemed to feel they’d discovered a low risk way to make a lot of money fast. Of course, there is no such animal. When metals started backsliding (entirely predictable) these fly-by-night investors bailed enmass and moved on. It was at that time, with the price depressed, that I opened a small position in the fund and than averaged in over the next 2-3 years.
-
@LLJB - The Hierarchy of Disagreement
- Friendly (No sweat)
- Mild (Let’s agree to disagree)
- Considerable (You must be off your rocker!)
- Serious (Take a long walk on a short pier why don’t you?)
- Nasty (unprintable)
So with only a “mild disagreement” there’s no cause for concern.
Regards
I have owned PRPFX for going on 20 years. However, I do so considering it one of my core holdings. It's about 7% in each of three different accounts. I recognize that I could build it myself and do better but I'm lazy.
I do NOT see PRPFX as a substitute for gold or silver precious metals. Folks, you know me. I have been preaching for many years that everyone should have some small percentage of precious metals in their overall holdings: 3-10% depending upon your bent. More that this is always speculation.
That said, with some of these types of assets, you really have to go from asset allocation in an account to overall wealth allocation. Recall the Elder Baron R saying that to protect yourself though economic bad times, you should have 1/3 of your wealth in securities, 1/3 in real estate and 1/3 in rare art (define as you wish but it ain't Beanie Babies).
I would caution you folks to get some paper towels ready to wipe your screen before you run your own numbers.
and so it goes,
peace,
rono
If go to PortfolioVisualizer.com and run a backtest of a portfolio consisting of 1/3 SPY, 1/3 GLD, and 1/3 IEF (rebalanced quarterly), and plot it against a benchmark of PRPFX, the charts look virtually identical from Sept 2015 thru Dec 2017.
Same is true from Dec 2004 through April 2011.
But from May 2011 through Aug 2015, PRPFX underperformed SPY/GLD/IEF by 4.75% per year. Undoubtedly because it was overweight gold.
I am glad for PRPFX investors it seems to be back on track to providing diversified returns!
Thanks for the analysis. No doubt I caught a sweet-spot in early 2016.
Would never want to be an apologist for Michael Cuggino. I could probably make a good case for not owning his fund as well. But for some reason, PRPFX is disliked by many who’ve never owned it, and misunderstood by a great many others. Some mistakingly term it a gold fund.
I noted previously the deleterious effect massive inflows and outflows had on this fund. Can’t help wondering whether the “overweight gold” you reference was related to the metal’s stratospheric rise in value during that period. It roughly sextupled in value between ‘99 and 2011, rising from $300 to $1900. That’ll put you “overweight”. Certain to give any manager a headache.
Another thought: Did the massive inflows into PRPFX contribute to gold’s rise during that period? That’s something I think about a lot - the possibility that heavy inflows into a fund (or certain category of funds) might indirectly drive the valuations of the assets in which they invest. The elephant chasing his tail.
What does that mean, PRPFX was "over-weight" gold? The weight within the portfolio doesn't change.
With a combined 25% benchmark weighting to gold and silver, PRPFX will respond more to price changes in those metals than most funds having little or no exposure. Metals tend to be wildly erratic “assets”, which explains your preference at one time for this fund over owning GLD or a dedicated p/m fund. A bit like adding some water to your single malt to dampen the effect. I placed assets in quotes because there was a good thread here about 5 years ago debating whether gold should even be considered a “financial asset”.
Sounds like you had a reasonably good experience with PRPFX and moved out when momentum reversed. As with any open-ended fund, heavy selling by shareholders over short periods can ding returns, hurting those who stay behind - but there’s no way that I know of to prevent them, and I've occasionally engaged in the same practice to lock in a quick gain.
Adding a volatile investment to an otherwise conservative fund will affect returns during both the up and down cycles. Hussman, for example, once held significant mining shares in HSTRX. On the surface it appeared a mild mannered income fund. But in 2007 it outpaced the competition with a near 13% gain; than lost 8.37% in 2013. Suspect you’ll find those numbers track the performance / underperformance of GLD. (If memory is correct, p/m shares represented near 10% of the fund at times,)
I’ll go out on a limb and say I like gold / miners at the moment. In part that’s because most everything else appears so expensive. That said, timing the metals is a fool’s errand and I have 0% confidence in my outlook. Consequently, I currently maintain only a “token” foothold in a dedicated p/m fund.
Re “Overweight” (First mentioned in this thread by @PBKCM):
Unless a fund rebalances every day, rapidly rising prices for a particular asset might move that asset to a temporary overweight position relative to benchmark - until the manager rebalances. Don’t know how frequently PRPFX rebalances, but doubt it’s every day. So I’d expect that the fund went temporarily overweight gold for a stretch simply because it was appreciating much more rapidly than the fund’s other assets.
I did own PRPFX for a time and it did well when I held it. By the way, like you, I also owned HSGFX back then. I truly can't remember when I bought or when I sold PRPFX. I know I got out when gold started to drop. I did use Permanent Portfolio as a proxy gold fund. I think PP can be a long term holding for sure, but I also think there are other conservative allocation or balanced funds that will do better with less volatility.
Miners on the other hand, I lost money and they left a bitter taste. I remember when I first started coming to FundAlarm, Gold, precious metal-miners and pretty much all commodities were the darlings of the site. Oh, Asia was a big sector too. I remember people were big-time over weighting Asia because, "Asia was the future" meaning the U.S was not. That didn't work out well. I believe Junkster would call them group-think funds, but for a short while they did make money.
The thing is, I've given up trying to catch the hot sectors or time the market. I personally don't think gold over time is a good investment. Way to much volatility for the long term returns you will achieve. PM miners, hate-um. I remember drinking the kool-aid back in the day and lost money. That won't happen again. PM Miners is a timing investment in my mind. A risky one. Not a buy and hold. And what I'm saying is it doesn't work for me. Others may have had a profitable experience - if they knew when to get out.
I hope you do well Hank with your play.
I think I agree with everything you said there Mike. I’d just as soon play the tables in Vegas as own much gold. Hold it indirectly through several funds of course, but as far as dedicated p/m funds go - perhaps 1 or 2%. Don’t know how PRPFX gets away with it - but far less volatility than I’d expect for a fund with 25% in precious metals.
Yes - I did own both HSGFX and HSTRX for a few years in the 2000-2005 period. The latter was actually a pretty good fund and is the one I remember holding around 10% in gold and p/m shares.