PUTNAM INVESTMENTS CEO ROBERT L. REYNOLDS CALLS FOR A “MODERN SOLUTION SET” TO HELP INVESTORS AND ADVISORS DYNAMICALLY MANAGE RISKS AND RETURNS AMID CONTINUING ECONOMIC AND MARKET VOLATILITY
Reynolds Notes that Putnam's Absolute Return Fund Suite has Delivered Solid, Positive Investment Returns Close to their Rolling 3-year Targets at Reduced Levels of Volatility
Putnam Renames Asset Allocation Suite of Funds to Highlight Increasing Need for ‘Dynamic’ Approach to Investing in a Complex, Evolving Environment — Utilizing an Array of Resources, Tools and Talent
BOSTON, January 30, 2012 – Speaking at a market outlook briefing in New York late last week, Putnam Investments President and CEO, Robert L. Reynolds, stressed the need for financial providers to offer a “modern solution set,” that combines traditional investment strategies with a series of new offerings designed to help advisors and investors manage risk and seek return amid an unprecedented confluence of high volatility, systemic risk anxiety and repressed interest rates that may persist for years.
“We are navigating a changed, post-crisis environment that poses multiple, overlapping challenges,” Reynolds said. “We need to look at risk through a new lens, find better ways to balance risk with return and also discover new sources of income — all amid a very challenging rate environment.
“We are seeing increased demand from investors and advisors for better volatility management and more downside protection,” said Reynolds. “Advisors and their clients have endured extreme levels of market volatility in recent years — driven by a perfect storm of geopolitical and economic uncertainty, high correlation across and within asset classes, irregular valuation of securities and fewer sources of investment income. We believe investors want providers to offer a more modern solution set, using new portfolio construction tools to complement existing strategies, to help them manage a growing pool of volatility factors.”
Reynolds noted that over the past several years, Putnam has developed and introduced a series of investment offerings that seek to create a “shock-absorber effect” to help fulfill a diverse range of client financial goals — including accumulating and withdrawing income for retirement, preparing for higher education costs, building a financial legacy, and more. In many of the new products that the firm has brought to market, according to Reynolds, it has sought to manage multiple risk factors that investors need to balance, including unprecedented market volatility, inflation, taxes, the clients’ own increasing longevity and their concerns about lifelong income shortfalls.
Curbing Volatility: Putnam Absolute Return Funds
As of January 13, 2012, the official 3-year anniversary of their launch to the public, all four of the Putnam Absolute Return Funds had achieved positive, average annualized investment return — net of fees — delivering nearly 85% of their three-year performance targets, with very modest overall volatility profiles, as reflected by their strong Sharpe ratios. Since their launch, the funds have attracted nearly $3.5 billion and been used by over 12,000 financial advisors nationwide (representing over 600 broker-dealer platforms).
Besides coming close to their rolling three-year return targets, Putnam Absolute Return Funds also showed far less volatility than was seen in most securities markets over the past three-year period. For example, Absolute Return 700 Fund, the most aggressive in the suite, experienced a standard deviation of only 5.08%, representing approximately one quarter of the variability experienced by the S&P 500 Index (18.08%) over the same time.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. The class A share performance shown assumes reinvestment of distributions and does not account for taxes. After-sales-charge returns reflect a maximum load of 5.75% for Putnam Absolute Return 500 and 700 Funds and 1.00% for Putnam Absolute Return 100 and 300 Funds. “What you pay” reflects Putnam Management’s decision to contractually limit expenses through 2/29/12. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
Reynolds noted that thousands of advisors and investors have “embraced the unique level of transparency provided by the clearly-stated targets of the Absolute Return Funds. They like the idea of being able to choose between four distinct risk-return profiles when constructing an investment portfolio.”
“After the turmoil the market has experienced, we believe broader marketplace demand for these kinds of low-volatility strategies will continue to grow,” explained Reynolds. He noted that advisors are beginning to look toward the absolute return strategies as core holdings in clients’ portfolios, serving as a bedrock for investors with both medium- and longer-term (multiple decade) horizons.”
Taking a ‘Dynamic’ Approach to Asset Allocation
Since the launch of its three original asset allocation funds, Putnam, through its Global Asset Allocation team, has relied on a comprehensive, tactical bottom-up securities’ selection process to manage its investments in these funds. This same “dynamic” approach helped to lay the groundwork for another new option — Putnam Dynamic Risk Allocation Fund — introduced to the retail market by the firm in the fall of 2011. The fund employs a form of “risk parity,” a well-recognized strategy that the firm has managed for a variety of sophisticated institutional investors for over a half-decade. Designed to complement the three other more traditional asset allocation offerings, Putnam Dynamic Risk Allocation Fund provides a different lens on investing by actively and regularly rebalancing varying sources of portfolio risk within and among multiple asset classes.
The suite of Putnam Dynamic Allocation Funds is managed by Putnam’s Global Asset Allocation team, led by Head of Global Asset Allocation Jeffrey L. Knight. The team’s specialists have more than 17 years of experience in managing multi-asset portfolios for both the institutional and retail marketplaces, including more than five years of managing portfolios employing a risk-parity approach. Beyond their own skills and resources, the team draws upon the knowledge of the larger Putnam investment organization.
Additional Modern Day Investment Capabilities
About Putnam Investments
Standard deviation measures how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a 3-year period.
Sharpe ratio is a measure of historical adjusted performance calculated by dividing the fund’s return minus the risk free rate (ML 3mth T-Bill) by the standard deviation of the fund’s return. The higher the ratio, the better the fund’s return per unit of risk.
Consider these risks before investing: Our allocation of assets among permitted asset categories may hurt performance. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Additional risks are listed in the funds’ prospectus.
Consider these risks before investing: Putnam Short Duration Income Fund is not a money market fund. The effects of inflation may erode the value of your investment over time. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Additional risks are listed in the funds’ prospectus.
Our focus on leveraged companies and the fund’s “non-diversified” status can increase the fund’s vulnerability to these factors. Our use of short selling may increase these risks.
Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing.Putnam Retail Management