Putnam CEO Robert Reynolds, speaking on Thursday in New York at Putnam Investments’ 2012 Investment Outlook Briefing, called for looking at risk “through a new lens” to find “better ways to balance risk with and also discover new sources of income.”
Saying that such an initiative would of necessity take place in a “post-crisis environment that poses multiple, overlapping challenges,” Reynolds (left) called for advisors and their partners to offer “more modern solution sets, using new portfolio construction tools to complement existing strategies, to help them manage a growing pool of volatility factors.”
As an example of an investing vehicle that does just that, Reynolds cited Putnam’s four-fund suite of absolute return funds–Absolute Return 100, Absolute Return 300 Absolute Return 500 and Absolute Return 700–that as of their three-year anniversary on Jan. 13, 2012, had returned 85% of their three-year performance targets–three-year annualized returns of 1%, 3%, 5% and 7% over Treasury bills. Those funds have received $3.5 billion in inflows through 12,000 advisors on more than 600 BD platforms, Reynolds reported.
As for managing risk, the four funds had the following standard deviations and Sharpe ratios over those three years:
Fund Name/Ticker Standard Deviation Sharpe Ratio
1/1/2009 to 12/31/2011 1/1/2009 to 12/31/2011
Absolute Return 100 (PARTX) 1.39 0.69
Absolute Return 300 (PTRNX) 2.88 0.73
Absolute Return 500 (PJMDX) 4.16 1.01
Absolute Return 700 (PDMAX) 5.08 1.15
In addition to gaining advisor acceptance for these low volatility funds, Reynolds said advisor interest in vehicles that allow for greater tactical movement has led Putnam to change the name of its suite of asset allocation funds to “Putnam Dynamic Asset Allocation Funds.” Last fall, Putnam also introduced a new fund called the Putnam Dynamic Risk Allocation Fund (PDRFX) that uses a tactical bottom-up securities selection process, and a form of ‘risk parity,’ a strategy formerly used only for Putnam institutional investors.