Permanent Adjacent?

Meb Faber Tweeted out an article he wrote in 2020 about a "stay rich portfolio" which he called the Global Asset Allocation. Presumably, the article was in support of the Cambria Global Asset Allocation ETF (GAA) which allocates 45% to equities, 45% to fixed income and 10% into alternatives. 

We've looked at GAA before. The allocation is interesting and results need to be looked at closely to understand them.

The overall numbers aren't so hot. The 67%/33% blend is in there because it was mentioned in the article as being good middle ground between all GAA or all T-bills. The DIY version I built as follows;

Gold is mentioned favorably in Meb's article and I know he thinks managed futures is an excellent diversifier. I chose QMHIX for this to start playing with higher volatility managed futures. MERFX and BKLN are client holdings. 

When we look at the Cambria funds, the volatility stats usually aren't that good, they seem high for GAA given it only has 45% in equities. I wouldn't expect 45% equities to keep up with 60% equities but it would be nice for the volatility to be lower than it is for GAA, inline with the DIY version maybe. 

Where the results get interesting beyond the obvious that the  GAA ETF has been doing very well for the last year and half is that it does appear to be differentiated from VBAIX. Differentiation can be good.

Pivot to a new fund that might blow your mind. It is blowing my mind, not being sarcastic. It's thePorter & Company Porter Index Fund(PPCP) it is a quadrant style fund that is modeled after the Permanent Portfolio but the asset mix is different. It allocates 25% each to... are you ready... property and casual insurers, capital efficient equities, hard assets and short term fixed income. What?

This one is easy to backtest thanks to the iShares US Insurance ETF (IAK).

Which one is which? That's a 20 year run and the lack of dispersion is remarkable. 

Copilot has thoughts. First it says that PRPFX hasn't been true to the Permanent Portfolio in terms of long term bonds. The equity allocation in PRPFX has generally tilted toward quality, not simpler market cap weighting. Gold is gold of course and cash is cash. Copilot thinks "insurers are unusually resilient, capital-efficient, low-volatility compounders that behave well across many macro regimes."

I don't know about that. The drawdowns look pretty rough for IAK. It then told me that IAK isn't the best proxy even though it gave me the ticker in the first place.

At that I point I threw in the towel. Seeing how PCPP trades might shed some light or maybe IAK is a proxy for something else that Copilot isn't teasing out. What's going on then? Leave your thoughts in the comments.