Putnam Capital Manager

Putnam Mortgage Securities Subaccount

The subaccount seeks as high a level of current income as Putnam Management believes is consistent with preservation of capital.

Putnam Mortgage Securities Subaccount

Fund description

The subaccount typically divides its assets between U.S. Treasury securities and Government National Mortgage Association certificates (Ginnie Maes). The fund takes a slightly more aggressive approach to total return by investing in longer-term securities. Investors should have an investment horizon of at least three years to give their investment the full potential to benefit from a typical interest-rate cycle.

Sales story

Seeking opportunities through mortgage-backed securitiesBroad securitized opportunities:The fund invests in mortgage sectors, including agency MBS and CMOs, and non-agency RMBS and CMBS, and ABS.Higher potential returns: By investing in mortgage-backed bonds, the fund can offer the potential for higher returns than an investment strategy focused only on agency MBS.Leading research: The fund's portfolio managers use proprietary models to assist in the evaluation of mortgage-backed bonds and to manage the fund's interest-rate risk.

Management team

Lipper ranking ‡ as of 06/30/20

Category: U.S. Mortgage Funds

  Percentile ranking Rank/Funds in category
10 yrs. 88% 7/7
1 yr. 93% 13/13
3 yrs. 93% 12/12
5 yrs. 92% 11/11

Risk characteristics as of 06/30/20

Avg. Eff. Maturity 2.40
Avg. Eff. Duration 1.19
Avg. Coupon 5.62
Avg. Yield to Maturity 11.30
Alpha (%) --
Beta 0.10
R squared 0.00
Standard deviation (3 yrs.) 7.37

Maturity details

0 to 1 yr. -22.57%
1 to 5 yrs. 91.07%
5 to 10 yrs. 29.90%
10 to 15 yrs. 1.45%
Over 15 yrs. 0.15%

Quality ratings

AAA 99.89%
AA 6.55%
A 13.22%
BBB 8.96%
BB 3.23%
B 3.60%
CCC and Below 2.50%
Not Rated -37.95%

‡ Lipper is an industry research firm whose rankings are based on total return performance, vary over time, and do not reflect the effects of sales charges. Past performance is not indicative of future results.

Quick facts as of 07/31/20

Fiscal Year End December
Asset Class Putnam Capital Manager
Subaccount Status Open to new investors
Number of issues 875
Turnover (fiscal year end) 1,171%
Net Assets $47M
Inception Date 02/01/00

Holdings

Fnma Fn30 Tba Umbs 02.5000 07/01/2050 19.74%
Fnma Fn30 Tba Umbs 02.5000 08/01/2050 6.57%
Fnma Fn30 Tba Umbs 04.5000 07/01/2050 4.52%
Gnma Gii30 Tba 04.5000 07/01/2050 4.49%
Fnr 2007-95 A3 00.4183 08/27/2036 3.43%
Fnma Fn30 Tba Umbs 04.0000 07/01/2050 2.23%
Bf0101 03.5000 06/01/2056 1.57%
Fhs 315 Po Po 00.0000 09/15/2043 1.51%
Fnr 2016-81 Io 05.9655 11/25/2046 1.08%
Fnr 2016-85 Sl Io 05.9155 11/25/2046 1.04%
Top 10 holdings, total: 46.18%

Top 10 holdings as of 06/30/20
1: Fnma Fn30 Tba Umbs 02.5000 07/01/2050 19.74%
2: Fnma Fn30 Tba Umbs 02.5000 08/01/2050 6.57%
3: Fnma Fn30 Tba Umbs 04.5000 07/01/2050 4.52%
4: Gnma Gii30 Tba 04.5000 07/01/2050 4.49%
5: Fnr 2007-95 A3 00.4183 08/27/2036 3.43%
6: Fnma Fn30 Tba Umbs 04.0000 07/01/2050 2.23%
7: Bf0101 03.5000 06/01/2056 1.57%
8: Fhs 315 Po Po 00.0000 09/15/2043 1.51%
9: Fnr 2016-81 Io 05.9655 11/25/2046 1.08%
10: Fnr 2016-85 Sl Io 05.9155 11/25/2046 1.04%
Holdings represent 46.18% of portfolio
Top 10 holdings as of 05/31/20
1: Fnma Fn30 Tba Umbs 04.5000 06/01/2050 4.46%
2: Gnma Gii30 Tba 04.5000 06/01/2050 4.44%
3: Fnma Fn30 Tba Umbs 02.5000 07/01/2050 4.28%
4: Fnr 2007-95 A3 00.7372 08/27/2036 3.27%
5: Fnma Fn30 Tba Umbs 04.0000 07/01/2050 2.20%
6: Fnma Fn30 Tba Umbs 03.5000 06/01/2050 2.18%
7: Fnma Fn30 Tba Umbs 03.5000 07/01/2050 2.18%
8: Fnma Fn30 Tba Umbs 03.0000 06/01/2050 2.17%
9: Fnma Fn30 Tba Umbs 02.0000 07/01/2050 2.10%
10: Bf0101 03.5000 06/01/2056 1.57%
Holdings represent 28.85% of portfolio
Top 10 holdings as of 04/30/20
1: Fnma Fn30 Tba Umbs 04.5000 05/01/2050 4.40%
2: Gnma Gii30 Tba 04.5000 05/01/2050 4.37%
3: Fnr 2007-95 A3 01.1966 08/27/2036 3.15%
4: Fnma Fn30 Tba Umbs 04.0000 07/01/2050 2.18%
5: Fnma Fn30 Tba Umbs 03.5000 06/01/2050 2.16%
6: Fnma Fn30 Tba Umbs 03.5000 07/01/2050 2.16%
7: Fnma Fn30 Tba Umbs 03.0000 05/01/2050 2.16%
8: Bf0101 03.5000 06/01/2056 1.55%
9: Fhs 315 Po Po 00.0000 09/15/2043 1.50%
10: Fnr 2016-81 Io 05.6628 11/25/2046 1.08%
Holdings represent 24.71% of portfolio
Top 10 holdings as of 03/31/20
1: Fnma Fn30 Tba Umbs 04.5000 04/01/2050 4.32%
2: Gnma Gii30 Tba 04.5000 04/01/2050 4.26%
3: Fnma Fn30 Tba Umbs 03.5000 04/01/2050 4.25%
4: Fnr 2007-95 A3 01.8767 08/27/2036 3.03%
5: Fnma Fn30 Tba Umbs 04.0000 04/01/2050 2.14%
6: Fnma Fn30 Tba Umbs 03.0000 04/01/2050 2.11%
7: Bf0101 03.5000 06/01/2056 1.54%
8: Fhs 315 Po Po 00.0000 09/15/2043 1.50%
9: Fnr 2016-81 Io 05.2034 11/25/2046 1.03%
10: Fnr 2016-85 Sl Io 05.1534 11/25/2046 1.01%
Holdings represent 25.19% of portfolio

Sector Weightings as of 06/30/20

Cash Investment Non-Cash Investment Total Portfolio
Weight Spread Duration Weight Spread Duration Weight Spread Duration
Agency pass-through 9.48% 0.44 38.18% 1.45 47.66% 1.89
Agency CMO 41.78% 1.49 0.64% 0.02 42.42% 1.51
Commercial MBS 12.92% 0.36 28.78% 0.26 41.70% 0.62
Residential MBS (non-agency) 22.24% 1.16 0.00% 0.00 22.24% 1.16
Net cash 10.73% 0.00 0.00% 0.00 10.73% 0.00
Asset-backed securities (ABS) 2.85% 0.09 0.00% 0.00 2.85% 0.09
Interest rate swaps 0.00% 0.00 0.00% -1.85 0.00% -1.85
U.S. Treasury/agency 0.00% 0.00 0.00% -3.13 0.00% -3.13

Spread duration is displayed in years and reflects the contribution by sector to the portfolio's total spread duration with the exception of the Treasury and Interest-rate swap sectors where effective duration is displayed. Spread duration estimates the price sensitivity of a specific sector or asset class to a 100 basis-point movement, 1%, (either widening or narrowing) in its yield spread relative to Treasuries. Effective duration provides a measure of a portfolio's interest-rate sensitivity. The longer a portfolio's duration, the more sensitive the portfolio is to shifts in the interest rates. Allocations may not total 100% of net assets because the table includes the notional value of certain derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities.

Consider these risks before investing: Funds that invest in government securities are not guaranteed. Mortgage- and asset-backed securities are subject to prepayment risk, which means that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. The fund may have to invest the proceeds from prepaid investments, including mortgage- and asset-backed investments, in other investments with less attractive terms and yields. The fund’s investments in mortgage-backed securities and asset-backed securities, and in certain other securities and derivatives, may be or become illiquid. The fund’s exposure to privately issued mortgage-backed securities and mortgage-backed securities issued or guaranteed by the U.S. government or its agencies or instrumentalities may make the fund’s net asset value more susceptible to economic, market, political and other developments affecting the housing or real estate markets. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Default risk is generally higher for non-qualified mortgages. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Unlike bonds, funds that invest in bonds have fees and expenses. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography (such as a region of the United States), industry, or sector, such as the housing or real estate markets. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings or in relevant markets. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund. Variable annuities are long-term investments designed for retirement purposes. Withdrawals prior to age 59 1/2 may be subject to a 10% IRS penalty.

Credit qualities are shown as a percentage of the fund's net assets. A bond rated BBB or higher (A-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. To-be-announced (TBA) mortgage commitments, if any, are included based on their issuer ratings. Ratings may vary over time. Cash, derivative instruments, and net other assets are shown in the not-rated category. Payables and receivables for TBA mortgage commitments are included in the not-rated category and may result in negative weights. The fund itself has not been rated by an independent rating agency.