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Allocating Risk When Investing Has a Significant Role In The Marketplace According To Putnam Investments

Firm to Bring Message of 'New Ways of Thinking' to Cities Nationwide

BOSTON, June 19, 2013 — Recognizing and avoiding concentrated investment risks — including interest rate risk in bonds and overexposure to volatility in stocks — will be one of the key success factors for investors in today's dramatically changed securities markets, according to senior leaders from Putnam Investments, who spoke at a company-hosted investment forum earlier today. The Boston-based event was the kick-off to an eight city tour, entitled, "New Thinking, New Solutions," which aims to help financial advisors seize a new set of investment opportunities and mitigate unforeseen challenges for their clients in the decade ahead.

Putnam will be holding a series of meetings with advisors across the country, showcasing its investment talent and best thinking on the increasingly relevant issue of allocation of risk within the modern day portfolio. Events will be held in Charlotte, Chicago, Cleveland, Minneapolis, Philadelphia, Portland, and Seattle in coming weeks, with additional investment forums likely to be held in other cities this Fall.

In a presentation to prominent local financial advisors, Putnam investment leaders discussed the need to understand how a traditional bond portfolio can have embedded, concentrated interest rate risk, which could adversely affect investors if not managed accordingly. The firm explained how its proprietary risk/return analysis model clearly indicates that a traditional fixed-income asset allocation often results in a disproportionate exposure to serious risk in the case of any upward movement in rates.

Similarly, equity risk in a traditional balanced fund portfolio must also be assessed through what Putnam views as a "new lens" to reveal that in most cases, 90% of the underlying risk of a traditional 60/40 (stock/bond) balanced fund, resides in the 60% equity portion of the portfolio.

Speaking at the Boston event, Putnam Investments President and Chief Executive Officer Robert L. Reynolds said, "We believe that the conventional wisdoms shaped by decades of high-return investing — first in equities from 1982 to 2000 and then in fixed-income over the last 30 plus years — need to be re-examined or revised. Above all, there is a need to recognize the shifting nature of the investment landscape in both equity and fixed income markets, to seize opportunities and mitigate hidden — or at least, not apparent — sources of risk."

Reynolds and his colleagues illustrated Putnam's use of non-traditional approaches in portfolios construction as a way to better diversify risk –– limiting the possibility that any one market factor could negatively damage overall investment performance.

A One-Two Punch: Combining Traditional and Non-Traditional Approaches

In recent months, Putnam has been vocal about the need for advisors and their clients to address the dynamic evolution of the financial markets by combining traditional strategies with a host of non-traditional approaches, including:

  • Seeking value beyond mainstream indices (in both equity and fixed income markets)
  • Applying a stringent risk-allocation lens to assess the real "balance" in investment portfolios
  • Adopting strategies that may help curb volatility and deliver a smoother, more reliable sequence of returns
  • Pursuing "diversification of investment philosophy" by incorporating absolute return strategies in portfolios along with traditional benchmark-driven investments
  • Utilizing Sharpe-ratio and/or other "high efficiency" metrics to judge securities and strategies
New Ways of Thinking

Earlier this year, Putnam launched an awareness-building campaign to provide insight on the challenges facing financial advisors and investors today and beyond, encouraging them to consider 'New Ways of Thinking' about investing, which could include: taking a more targeted approach, pursuing the best ideas — wherever there are, allocating risk — not just assets, and finding new drivers of return. The firm has been sharing its message through print, direct marketing and online advertising, as well as content-rich thought leadership delivered through business seminars, industry events, and white papers. Key areas of focus include traditional and alternative products, benefits of Sharpe ratio investing, active risk management, and more.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm. At the end of May 2013, Putnam had $136 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Tokyo, Beijing, Singapore and Sydney. For more information, visit http://www.putnam.com.


Putnam Media Contacts:
Jon Goldstein – 617-760-1127 (office), 516-946-5598 (cell), jon_goldstein@putnam.com
Laura McNamara – 617-760-1108 (office), 978-505-0524 (cell), laura_mcnamara@putnam.com

*Stocks are represented by the S&P 500 and bonds are represented by the Barclays Aggregate Bond Index. Indexes are unmanaged and used as a broad measure of market performance. It is not possible to invest directly in an index.

All investing involves risk and you can lose money.

Standard deviation is a measurement of risk. It calculates 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 specific period of time.

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.