Robert L. Reynolds, President and CEO, Putnam Investments
In this edition of Active Voice, Cathy Saunders, Head of Corporate Sustainability and Public Policy, hosts a conversation with Robert L. Reynolds, President and CEO of Putnam Investments, on the state of the investment industry; the role of environmental, social, and governance (ESG) strategies; innovation at Putnam; and lessons learned over the past year.
The world’s experience with the Covid-19 pandemic and market recently passed the one-year mark. What are some of your reflections looking back?
When we at Putnam began remote work on March 13, 2020, we thought we might be there through Memorial Day, then July 4, then Labor Day. But here we are. Our team proved very resourceful — productivity is up across the board, we had one of our best years, and momentum is continuing into 2021.
How would you characterize the first 100 days of the new leadership in Washington, particularly regarding retirement savings policy?
Any time there’s a change in administration — and this year there was also a change in the Senate — there are adjustments. But the majorities are razor thin, so government is walking a very fine line. For our industry, federal tax incentives for retirement saving are often considered low-hanging fruit. Since workplace savings are invested before taxes, they grow tax free and then are only taxed upon distribution (except for Roth IRAs). The retirement savings sector is heavily regulated, and we are working with new leadership at the Department of Labor and other agencies.
What do you anticipate with the proposed Securing a Strong Retirement Act (aka “SECURE Act 2.0”)?
The SECURE Act 2.0 bill enjoys robust bipartisan support, as did previous retirement legislation such as the Pension Protection Act (2006) and the SECURE Act (2019). Workplace savings works — fully 75% of workers with access to plans are saving for retirement, as compared with 10% outside of plans. Roughly 55%–60% of workers have access to ERISA-regulated plans.1 We need to expand coverage, and SECURE Act 2.0 will help.
During the Covid-19 market turmoil, defined contribution retirement savers stayed the course. Few changed investment allocations or savings levels and even fewer cashed out their portfolios.
The 401(k) savings system is stable and efficient. Many years ago, when the industry shifted from giving savers access to their accounts from quarterly to daily, I recall that the number of transactions were cut in half. Today, some 70% of 401(k) inflows are directed to managed solutions like target-date funds,2 which, in my opinion, are “packaged advice,” making it easier for savers to succeed and harder to fail.
Do you consider ESG factors to represent a philosophy, an investment category, a product, or a way to manage Putnam Investments?
All of the above. Europe is ahead in this area, but U.S. ESG strategies are steadily rising. Some five years ago we hired Katherine Collins, our Head of Sustainable Investing, who has been applying an ESG approach to all parts of our investment platform — equity, income, and multi-asset. For the first two years of this effort, we worked to engrain ESG into people’s thinking. Then, three years ago we made ESG the mandate for two of our equity funds. Our ESG funds are in high demand among investors across all age groups.
One feature of ESG investing gaining new prominence in our industry is a focus on diversity.To succeed in a competitive industry, you need the best people. And of course, excellence doesn’t correspond to gender, race, sexual orientation, or anything else. The best professionals are always in demand, so we’ve developed a first-class recruiting effort. Over 50% of retail assets under management at Putnam have women on the portfolio management team, well above the industry average.3
What’s on top of Putnam’s innovation agenda?
Putnam is an engine that strives to generate alpha. And we deliver that alpha through many different forms — mutual funds, collective investment trusts (CITs), and separately managed accounts (SMAs). We’ve recently added four active exchange-traded funds (ETFs) to the mix. In terms of strategies, we are delivering absolute return and hedge funds. We deliver clients what they need — not what we think they ought to want.
Our principle is to be “always active” — in investment strategies, distribution, service, and policy engagement. Where are the next active opportunities to be found?
We’re totally open to new ideas and new thinking with a view to maximizing opportunities. We’ve trimmed the number of funds in our lineup, and we are studying market consolidation very closely. We offer a variety of investment strategies to serve investors as markets evolve, as in the recent shift from growth to value. Putnam is an active manager. This means we manage the company actively, embracing change in an industry that demands constant change.
What lessons have you learned over the past 12 months that have helped you focus on your “true north”?
The importance of listening. The key to our success is a passion to understand what’s really happening — to learn new things and to be open to new ideas. Today, the future is as bright as I’ve ever seen. Investors need good advice, and we believe they need our investment products. Putnam is right in the middle of it. We’re in a great position to help people. So, we will be there.
1 U.S. Department of Labor, Bureau of Labor Statistics, “National Compensation Survey: Employee Benefits in the United States, March 2019.”
2 Sarah Holden, Jack VanDerhei, and Steven Bass, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2018,” EBRI Issue Brief, no. 526, and ICI Research Perspective, vol. 27, no. 2 (March 2021).
3 Asset data as of 12/31/20; Flowspring Research 2018.
This material is for informational and educational purposes only. It is not designed to be a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. The material was not prepared, and is not intended, to address the needs, circumstances, and objectives of any specific institution, plan, or individual(s). Putnam is not providing advice in a fiduciary capacity under applicable law in providing this material, which should not be viewed as impartial, because it is provided as part of the general marketing and advertising activities of Putnam, which earns fees when clients select its products and services. The views and strategies described herein may not be suitable for all investors. Prior to making any investment or financial decisions, any recipients of this material should seek individualized advice from their personal financial, legal, tax, and other professional advisors that takes into account all of the particular facts and circumstances of their situation. Unless otherwise noted, Putnam is the source of all data. Putnam Investments cannot guarantee the accuracy or completeness of any statements or data contained in the material. Information and data contained in this material are subject to change. Actual results could differ materially from those anticipated. All investments involve risk, and investment recommendations will not always be profitable. Putnam Investments does not guarantee any minimum level of investment performance or the success of any investment strategy. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results. This material or any portion hereof may not be reprinted, sold, or redistributed in whole or in part without the express written consent of Putnam Investments. The information provided relates to Putnam Investments and its affiliates, which include The Putnam Advisory Company, LLC, Putnam Investment Management, LLC, Putnam Investments Limited® and Putnam Retail Management, LP.
Investing involves risk, including the loss of capital.
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.
Issued in the United Kingdom by Putnam Investments Limited®. Putnam Investments Limited is authorized and regulated by the Financial Conduct Authority (FCA). For the activities carried out in Germany, the German branch of Putnam Investments Limited holds a permit as a financial investment broker in accordance with Sec. 34f para. 1 sentence no. 1 of the German Trade Ordinance and is registered under the registration number D-F-16077N8-19 in the publicly available broker register. Putnam Investments Limited is also permitted to provide cross‐border investment services to certain EEA member states. In Europe, this material is directed exclusively at professional clients and eligible counterparties (as defined under the FCA Rules, or the German Securities Trading Act (Wertpapierhandelsgesetz) or other applicable law) who are knowledgeable and experienced in investment matters. Any investments to which this material relates are available only to or will be engaged in only with such persons, and any other persons (including retail clients) should not act or rely on this material. Furthermore, this material is only intended for the recipient receiving it directly from Putnam Investments Limited and should not be forwarded to, or relied upon by, the recipient's underlying clients.
Prepared for use with wholesale investors in Australia by Putnam Investments Australia Pty Limited, ABN, 50 105 178 916, AFSL No. 247032. This material has been prepared without taking account of an investor’s objectives, financial situation, and needs. Before deciding to invest, investors should consider whether the investment is appropriate for them.
Prepared for use in Canada by Putnam Investments Canada ULC (o/a Putnam Management in Manitoba). Where permitted, advisory services are provided in Canada by Putnam Investments Canada ULC (o/a Putnam Management in Manitoba) and its affiliate, The Putnam Advisory Company, LLC.
This material is prepared by Putnam Investments for use in Japan by Putnam Investments Securities Co., Ltd. (“PISCO”). PISCO is registered with Kanto Local Finance Bureau in Japan as a financial instruments business operator conducting the type 1 financial instruments business, and is a member of Japan Securities Dealers Association. This material is prepared for informational purposes only, and is not meant as investment advice and does not constitute any offer or solicitation in Japan for the execution of an investment advisory contract or a discretionary investment management contract.
For informational purposes only. Not an investment recommendation.
This material is provided for limited purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, or any Putnam product or strategy. References to specific asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations or investment advice. The opinions expressed in this article represent the current, good-faith views of the author(s) at the time of publication. The views are provided for informational purposes only and are subject to change. This material does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. Investors should consult a financial advisor for advice suited to their individual financial needs. Putnam Investments cannot guarantee the accuracy or completeness of any statements or data contained in the article. Predictions, opinions, and other information contained in this article are subject to change. Any forward-looking statements speak only as of the date they are made, and Putnam assumes no duty to update them. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those anticipated. Past performance is not a guarantee of future results. As with any investment, there is a potential for profit as well as the possibility of loss.
Diversification does not guarantee a profit or ensure against loss. It is possible to lose money in a diversified portfolio.
Consider these risks before investing: International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Bond investments are subject to interest-rate risk, which means the prices of the fund’s bond investments are likely to fall if interest rates rise. Bond investments also are subject to credit risk, which is the risk that the issuer of the bond may default on payment of interest or principal. Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds, which may be considered speculative. Unlike bonds, funds that invest in bonds 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. Commodities involve the risks of changes in market, political, regulatory, and natural conditions. You can lose money by investing in a mutual fund.
Putnam Retail Management.