Putnam Spectrum Funds

Seeking returns from opportunities
in leveraged companies

With a career that spans the history of
leveraged investing, portfolio manager David Glancy has deep expertise and specialized skills.

Can increase return on equity | Total return and lower volatility potential | Performance history of leverage companies

Equity and debt securities of leveraged companies can provide strong returns

Leveraged company equities offer the potential to outperform the stock market by a significant margin, particularly during a period of economic recovery. Since these companies use debt heavily, they tend to have their best performance when credit is available, interest rates are low, and strong economic momentum supports business earnings.

An example of such a period began in early 2003 as the market and the economy entered a recovery. The federal funds rate was approximately 1.25%, and economic growth accelerated from 1% to 7%. Over five years, leveraged company stocks nearly doubled the return of the S&P 500. High-yield bonds and bank loans also provided strong returns in the same period.

Bar Chart showing Leveraged Company results during the 2003 economic recovery

Relative performance can vary in other periods (illustration below). In the most recent five-year period, as the economy peaked and then slid into recession, debt securities of leveraged companies outperformed the stock market, but leveraged company stocks underperformed.

Bar Chart showing Leveraged Company results during the 2003 economic recovery

The first chart shows index performance during a period of strong returns for leveraged company stocks. Both charts do not reflect index performance during other time periods, and is for informational purposes only. They do not reflect the performance of any Putnam fund, which will differ. Leveraged company stocks are measured by the Credit Suisse Leveraged Equity Index, which includes companies that issue high-yield corporate bonds included in the Credit Suisse High Yield Bond Index; stocks are measured by the S&P 500 Index, a broad measure of stock market performance; high-yield bonds are measured by the JPMorgan Developed High Yield Index, which represents high-yield fixed-income securities issued in developed countries; and bank loans are measured by the S&P/LSTA Leveraged Loan Index, which represents bank loans issued to leveraged companies. Indexes are unmanaged and do not reflect any fees or expenses, and you cannot invest directly in an index. Past performance is not indicative of future results, and results may differ over other performance periods.

Strategies that use leverage extensively to gain exposure to various markets may not be suitable for all investors. Any use of leverage exposes the strategy to risk of loss. In some cases, the risk may be substantial.

Read David Glancy’s latest insight into why leveraged companies are choosing to pay more for financing.

Product Information

Fund Fact Sheets (pdf)

Literature (pdf)

Consider these risks before investing: Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. 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.

Additional risks associated with Putnam Capital Spectrum Fund: 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. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. 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 summary prospectus containing this and other information for any Putnam fund or product, click on the prospectus section or call your financial representative or call Putnam at 1-800-225-1581. Please read carefully the prospectus if available before investing.

Putnam Retail Management