Global X Brings Permanent Portfolio Concept To ETFs
Global X introduced the Global X Permanent ETF (PERM) on 2/8/12 to provide investors with access to “proper diversification” in a simple, transparent, and cost-efficient single ETF. The fund allocates 25% to each of four asset classes, although some investors may consider it just three as two of the asset classes are U.S. Treasury securities.
Harry Browne, originator of the “permanent portfolio” concept, founded the Permanent Portfolio (PRPFX) mutual fund in 1982. PRPFX is still in existence today and has a 6.8% annualized return over its 30-year track record, according to the PRPFX fact sheet (pdf). The philosophy of the mutual fund is to invest a fixed target percentage of its assets in six carefully chosen, diverse, non-correlated investment categories.
However, the new ETF from Global X is not an ETF version of PRPFX. Instead, PERM attempts to track the underlying Solactive Permanent Index minus a 0.49% expense ratio. The index research data includes a 35-year backtest indicating an 8.7% annualized return with a standard deviation of 6.1% and a maximum drawdown of 18.1%.
PERM implements its strategy by holding London-listed ETFS Physical Gold ETC (20%) and ETFS Physical Silver ETC (5%) for the 25% precious metals allocation. The 25% stock allocation is accomplished with Vanguard FTSE All World ex-US ETF (VEU) 3.2%, Vanguard Small-Cap ETF (VB) 3.1%, and the remainder in individual large cap stocks. Individual bond holdings make up the two (long term and short term) 25% Treasury allocations.
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.