PRPFX has lost 8 billion in assets

[BRESLOW]

Spoke to PRPFX the other day and they said total assets about 9 Billion. At the beginning of 2013 they had 17 Billlion in assets. Anyone else worried about drop in total Assets.  Arnold

[AdamA]

We discussed this in another thread recently.

http://gyroscopicinvesting.com/forum/pe ... 9-9-today/

Bottom line is that it's no big deal, except for the tax burden it causes.

[dualstow]

Wow, I knew portart sold a lot of shares but I didn't know quite how many!
;-)

[BRESLOW]

My question was why has the fund PRPFX lost almost 9 Billion in assets. This has nothing to do with recent cap. gain payout. Why has the fund have so many people cashing out. 

[craigr]

Keep in mind that asset size can also shrink due to price dropping in an asset it holds like Gold.

But it is also perfectly normal for funds to see hot money flow out. In the last market crash in 2008, most stock funds saw massive outflows as people moved to other assets. Many stock funds posted distributions as they had to sell assets to cover redemptions.

However it's also the case that hot money chasing after returns is often doing it at the exact wrong time. So I wouldn't be surprised to see much of the money flow out of the fund like PRPFX going to stock funds which are at an all time high. Just like hot money flowing into PRPFX was doing so when gold was at an all time high.

Overall, there is always a risk that any fund will see big outflows when the returns it has start to cool off. It is pretty much par for the course in terms of (bad) investor behavior.

Personally, when I see big moves out of asset X into asset Y, I'm always tempted to re-evaluate my asset allocation rebalancing bands and make sure I'm not inadvertently overweighting the latest popular asset.

[BRESLOW]

Craig: Thanks for the answer. Will not sell anything at this time.  Arnold

[dualstow]

I remember Cuggino talking about people coming and going in herds. The first interview I found is not the one with that quote, but I found this excerpt from 2011:

At the end of 2001, after stocks had rallied 17-fold over two decades, Permanent Portfolio had assets of $52 million. Now, 10 years later, the fund is beating all rivals and assets have surged to $15.6 billion.

http://www.bloomberg.com/news/2011-09-1 ... 1970s.html

Ah, good times.

[Libertarian666]

It is performance chasing, as explained very well in this blog post (from 2010) by William Bernstein, which may have been posted here earlier:

"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

http://www.efficientfrontier.com/ef/0adhoc/harry.htm

[goodasgold]

It is performance chasing, as explained very well in this blog post (from 2010) by William Bernstein, which may have been posted here earlier:

"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times.

Could we please have an explanation of what Dr. B meant by "hug tracking error..." ? Thanks.

[craigr]

It is performance chasing, as explained very well in this blog post (from 2010) by William Bernstein, which may have been posted here earlier:

"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times.

Could we please have an explanation of what Dr. B meant by "hug tracking error..." ? Thanks.

Tracking error in this case is how a portfolio does to a stock or stock heavy/bond mix portfolio.

So the typical benchmark for people is the S&P 500 here in the states. If your portfolio does better than that you feel like you're just an awesome investor.

But if you do worse than that then you have regret as you hear everyone in the news or around the water cooler brag about how much money they made. You will secretly regret being around their awesomeness and will non-chalantly listen in for their secret investing strategy and how they put all their retirement into P2P lending services.

The thing is though that balanced portfolios will all have tracking error to a very heavy stock portfolio. The question is how much will it be and will an investor be OK with it when it shows up in the underperformance column?

Again with PRPFX a lot of the money was "hot money" chasing returns. For instance I spoke with someone that deals with advisors and they said these advisors were buying PRPFX because of the past returns. They didn't know a thing about what it actually did internally. This is a very common attitude and you'll see it repeated over and over again in various assets over the years.

[jfreib]

This is exactly why I moved all the money I had in PRPFX to my DIY PP portfolio about a year ago. PRPFX was great for a training wheels version of the PP to get me hooked. I began to worry though once it became too popular with people who didn't understand its goal. I feared (rightfully so it seems now) that once the stock market recovered all the return chasers would rush off and I would be stuck with the (tax) bill.

Hows that for market timing with a PP?

[portart]

I am now down to 30% of my portfolio in PRPFX. I think by the time I finish selling it off, I will keep about 7% as alternative investment. Outside of that, I have 5% in a split between GDX and GDXJ, in my VP up about 2.5% from when I got in. It's not selling off hard like before, even with the flash crash. It looks like institutional money is putting its toes in the water at this level. I certainly have less fear here then when gold was at its highs as a speculative investment. It does look like an eft split is doing better PRPFX as a PP but it's marginal. If we have a hard push in commodity stocks, it will probably do better then an etc split but that is why I have the VP. As HB wrote, something anything can happen but nothing has to happen.

[Reub]

portart, were you paid by PRPFX for the capital gain yet? I am still waiting 6 days after the distribution date! At this point, I would recommend people consider completely liquidating their positions in PRPFX as there is some shady stuff happening there.

[BRESLOW]

I got my $10,000+ check yesterday. Better check your mail box.  Arnold

[dualstow]

I am still waiting 6 days after the distribution date!

I dipped into the cesspool that is Yahoo Finance message boards, and it looks like Fidelity posted theirs on the 2nd or 3rd.
I'll contact Vanguard if I don't get mine this week.
I only have a small position.

[Reub]

Vanguard brokerage informed me yesterday that they had received an internal memo stating that the PRPFX distribution would be paid within 3-5 business days from yesterday. It sure seems that they are doing some irregular things at their end. Quite surprising!

[dualstow]

Vanguard brokerage informed me yesterday that they had received an internal memo stating that the PRPFX distribution would be paid within 3-5 business days from yesterday. It sure seems that they are doing some irregular things at their end. Quite surprising!

Their reply to me was a bit different. An excerpt:

Once it is received we will post it to your
account with the correct payable trade date.

Permanent Portfolio Fund is experiencing a delay in the processing of
year-end dividend distributions. These distributions will post to accounts
in approximately 3 to 5 business days...

So they're saying they haven't received anything from PRPFX yet. Hmm. But Fidelity *was* done on Jan 2nd.

[Reub]

Vanguard originally told me the same thing...that they hadn't received the funds from PRPFX. I then called PRPFX directly and they told me that Vanguard had received the distribution funds many days earlier. Being that the other major brokerages had paid their customers on Jan. 2nd or earlier, it sure looks like Vanguard brokerages was telling a fib. When I called Vanguard back and asked them if they had received the funds from PRPFX the guy was evasive and never answered the question. This leads me to the question of whether Vanguard brokerage services can be trusted, are they incompetent, or both?  I mean are there rules concerning how long a brokerage firm can hold your money interest free and not give it to you?

I am considering contacting the SEC on this matter.

[dualstow]

Let me know if you do contact the SEC. It certainly does sound fishy at this point. When I have time, maybe I'll check out the message boards of other non-Vanguard funds held at Vanguard.

[portart]

Schwab had it done in two days...

[Reub]

Keeping in mind that all other major brokerage services paid this on Jan. 2nd or earlier, I received this email today, Jan. 9th:

Thank you for taking the time to contact us about Vanguard Brokerage
>Services(R).
>
>Dividends received from other fund companies are typically received by
>Vanguard Brokerage within 2 to 5 business days after the payment date. As
>of January 8, 2014, no Vanguard Brokerage clients have been credited with
>the dividend from Permanent Portfolio (PRPFX), as they have not yet
>forwarded to us the dividends and information necessary to credit the
>proper accounts.
>
>We have received information from PRPFX that there may be a 1 to 2 day
>delay in receiving the end-of-year dividend payment, which totals $4.60 per
>share of ordinary dividends and capital gains. We expect to credit
>brokerage accounts within 2 to 3 business days.
>
>Please note this delay will not affect the payable date, the amount of the
>dividend, or the tax year (2013).
>
>Our management team is aware of this issue and are working with the fund
>company to resolve it as quickly as possible. We apologize for the delay,
>and for any inconvenience that this may cause.
>
>If you have additional questions, please call us at 800-992-8327 on
>business days from 8 a.m. to 10 p.m. and on Saturdays from 9 a.m. to 4
>p.m., Eastern time.
>
>Sincerely,
>
>----------- ---------
>Registered Representative
>Vanguard Brokerage Services(R)

This sure makes you wonder just how competent and reliable VBS is!

[sophie]

Please do keep the rest of us posted!  It is big news indeed if Vanguard is playing games with investor cash.

Shades of MF Global...

[ns3]

Please do keep the rest of us posted!  It is big news indeed if Vanguard is playing games with investor cash.

Shades of MF Global...

I'm waiting for a Roth-IRA rollover check from Wells Fargo to be re-mailed and deposited in Vanguard so please do keep us posted and I will also.

I did the same thing back in July and it did seem to take longer than expected but I didn't give it that much thought. Will pay closer attention this time.

[rickb]

Please do keep the rest of us posted!  It is big news indeed if Vanguard is playing games with investor cash.

Shades of MF Global...

I assume Vanguard is structured somewhat differently than MF Global, see http://www.bogleheads.org/forum/viewtop ... 6305.  The bottom line seems to be that the individual Vanguard funds (who are in turn owned by their shareholders) own the parent Vanguard company - but this thread doesn't mention Vanguard brokerage (which is not a fund).  The right question here is "who benefits if Vanguard brokerage delays these payments", which I think boils down to "who owns Vanguard brokerage".  I'd think Vanguard brokerage is owned by the parent Vanguard company, which is apparently owned by the funds, so any "profit" the brokerage might see from delaying payments would ultimately end up benefiting the shareholders of the various Vanguard funds.

Of course, maybe whoever runs Vanguard brokerage is on the hook to the parent Vanguard company to deliver X% or $X profit to the parent company - in which case, whoever this is presumably has a very strong incentive to do whatever is necessary meet this goal.

Frankly, I think it's more likely that the delay here is on the PRPFX end - they have a HUGE incentive to delay paying dividends (i.e. they have to actually transfer cash).  I could well imagine they'd prioritize exactly who they'd pay dividends to by fund family, and by luck of the draw or some other criteria Vanguard brokerage clients happened to end up on the short end of the stick.

One way to figure out whether it's Vanguard or PRPFX might be to determine whether any similar situations exist for Vanguard brokerage clients with any other funds, or if PRPFX dividend payments have been delayed for any other brokerages.

[dualstow]

Frankly, I think it's more likely that the delay here is on the PRPFX end - they have a HUGE incentive to delay paying dividends
...

You may be right, Rick. It should also be mentioned that Vanguard has long had "back room problems" resulting in slow accounting. So, even if it does turn out to be Vanguard's fault, it might not be anything sinister. Just slowness.

One way to figure out whether it's Vanguard or PRPFX might be to determine whether any similar situations exist for Vanguard brokerage clients with any other funds, or if PRPFX dividend payments have been delayed for any other brokerages.

This has been covered somewhat. Clients of other brokerage houses seem to have received payments last week. And, I mentioned that I would look for delays in other non-Vanguard funds. It's certainly happened in the past. Ten years ago, I owned stock in a shipping company that paid massive dividends. According to the message boards, Vanguard was always last to pay and they were last by a very long time.