The fund was started in 1982 by Terry Coxon, who co-wrote "Inflation-Proofing Your Investments: A Permanent Program That Will Protect You Against Inflation and Depression" with Harry Browne the year before, as a way to put the advice book's theories into practice.
The goal was to use asset classes that rise and fall independently to allow investors to retain their purchasing power in any economic climate.
"We wanted a way to deal with uncertainty," Coxon, the fund's original manager, said in a phone interview from Santa Rosa, California, where he writes for investment publications.
Cuggino joined the fund in 1991 and was promoted to treasurer before becoming manager. He graduated from Bentley University in Waltham, Massachusetts, with a bachelor's degree in accounting.
Trailing The Markets
Permanent Portfolio couldn't keep pace with the bull markets for stocks of the 1980s and 1990s. The fund gained an average of 4.4 percent annually in the 10 years ended Dec. 31, 1999, compared with 18 percent for the Standard & Poor's 500 Index, according to data compiled by Bloomberg.
The trend reversed with the 2000-2002 bear market. Permanent Portfolio averaged annual returns of 12 percent in the decade ended Aug. 31, 2011, compared with 2.7 percent for the S&P 500, a benchmark for big U.S. stocks.
Gold appreciated at a 21 percent annual clip and silver gained 26 percent a year in that period. Treasuries returned 5.5 percent a year, based on Bank of America Merrill Lynch's Treasury Master Index. The Swiss franc more than doubled in value against the U.S. dollar, data compiled by Bloomberg show.
Bond Yields
Bonds have little room to appreciate with 10-year Treasury yields near an all-time low of about 2 percent, said Joseph Tanious, a market strategist at JPMorgan Asset Management in New York, which oversees $1.3 trillion.
"In the long run it is hard to imagine interest rates going anywhere but up," Tanious said in a telephone interview. Bond prices fall as rates rise.