Chance to receive higher returns on equity

Leveraged companies possess strong upside potential for investors, including the potential to outperform the stock market by a signifigant margin.

Leveraged companies get a tailwind from economic recovery

Since these companies use debt heavily, they tend to have their best performance when credit is widely available, interest rates are low, and strong economic momentum supports business earnings.

Leveraged-company stocks, bonds, and bank loans were competitive with stocks during the last economic recovery, 12/31/01–12/31/06

Leveraged-company stocks, bonds and bank loans

In the recovery that followed the 2001 recession, leveraged-company stocks doubled the return of the S&P 500 Index. High-yield bonds and bank loans also provided strong returns in the same period.

Leveraged-company security indexes have remained competitive with stocks over the past four years, 12/31/09–12/31/13

Leveraged-company security indexes

Relative performance can vary in other time frames, but in the current recovery, leveraged-company stocks, high-yield bonds, and bank loans have once again shown their ability to perform well relative to the broad equity market.

Illustrations are for informational purposes only and 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 comprises 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.

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