Investing for income with an independent approach

Identifying and exploiting the risks and opportunities in today's fixed-income markets require truly active management, a commitment to fundamental research, and the resources to execute consistently.

We identify fixed-income opportunities through the active research of 70+ specialists

Co-Heads of Fixed Income

Discover our New Ways of Thinking® in fixed income


From our research blog

The outlook for high yield in the oilfield

The outlook for high yield in the oilfield

Fundamental research offers a guide to the risk that low oil prices pose to energy companies with high yield debt.

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Understanding risk is the key to building portfolios

We believe fixed-income risk should be divided into four categories: credit risk, interest-rate risk, prepayment risk, and liquidity risk. Different asset types may display different combinations of these risks, or be wholly aligned with just one of them. Having exposure to different types of fixed-income assets does not necessarily diversify a portfolio in terms of risk.

With a more comprehensive view of fixed-income risk, we can pursue a broader range of return sources. We regard this to be an advantage over investors positioned only for falling interest rates. We determine the risk profile of each fixed-income security, and construct portfolios to reflect the combination of risks that we find most worth taking. We can tap into a much broader range of potential fixed-income opportunities beyond those captured by the most common bond benchmarks — the Barclays U.S. Aggregate Bond Index and the Barclays Global Aggregate Bond Index.

We believe today’s most attractive opportunities lie outside the index.

Sectors with yields higher than their historical norms may offer compelling investment opportunities.

* This chart calculates an average OAS using the 10-year period ended 12/31/07 for two reasons. First, we believe this period covers a sufficient breadth of economic and market conditions to generate a representative long-term “average” OAS for the fixed-income security types under consideration. Second, it excludes the period of unprecedentedly wide OAS levels that occurred during the financial crisis beginning in 2008.

 

Credit

  • Corporate: Investment grade and high yield
  • Mortgage: Residential and commercial MBS
  • Sovereign: Developed and emerging markets

Interest-rate

  • Level, slope, bend
  • Currency
  • Real versus nominal rates

Prepayment

  • Agency MBS
  • Collateralized mortgage obligations
  • IOs and POs

Liquidity

  • Pricing, volatility risk
  • Spreads not associated with credit or prepayment risk

Putnam multisector funds pursue diverse out-of-benchmark opportunities

Our three multisector funds pursue opportunities beyond the benchmark indexes. Our portfolio managers can exploit areas of the market that tend to be overlooked by other investors and may be too small for larger funds to gain a meaningful foothold.

Putnam Income Fund

This nimble core bond fund pursues income with an all-weather bond portfolio mixing mortgage-backed, corporate, and government bonds.

Sector weightings as of 12/31/14

(Barclays U.S. Aggregate Bond Index vs Putnam Income Fund)

Review background on the interest-rate risk embedded in the Barclays U.S. Aggregate Bond Index.

Putnam Global Income Trust

This globally-diversified fund can invest in U.S., developed, and emerging market securities, that go beyond the Global Aggregate Index benchmark, while blending risk exposures with low correlations.

Sector weightings as of 12/31/14

(Barclays Global Aggregate Bond Index vs Putnam Global Income Trust)

Explore the diverse yield opportunities across global bond markets.

Putnam Diversified Income Trust

This "go anywhere" best ideas portfolio pursues multiple sources of return outside the constraints of its benchmark, investing across traditional and alternative bond markets and all types of fixed-income risks.

Sector weightings as of 12/31/14

(Barclays U.S. Aggregate Bond Index vs Putnam Diversified Income Trust)

Discover how Putnam has actively managed duration risk during this rate cycle.

Sources: Barclays, Bloomberg, Putnam as of 12/31/14.

Data is provided for informational use only. Past performance is no guarantee of future results. All spreads are in basis points and measure option-adjusted yield spread relative to comparable maturity U.S. Treasuries with the exception of non-agency RMBS and mezzanine CMBS, which are loss-adjusted spreads to swaps calculated using Putnam’s projected assumptions on defaults and severities, and agency IO, which is calculated using assumptions derived from Putnam’s proprietary prepayment model. Agencies are represented by Barclays U.S. Agency Index. Agency MBS are represented by Barclays U.S. Mortgage Backed Securities Index. Investment-grade corporates are represented by Barclays U.S. Corporate Index. High yield is represented by JPMorgan Developed High Yield Index. CMBS is represented by both Agency and Non-Agency CMBS that are eligible for inclusion in the Barclays U.S. Aggregate Bond Index; mezzanine CMBS is represented by the same index using the AA, A and BBB components. Average OAS for Mezzanine CMBS is for the 2000-2007 time period. Emerging-market debt is represented by the Barclays EM Hard Currency Aggregate Index. Non-agency RMBS is estimated using average market level of a sample of below-investment-grade securities backed by various types of non-agency mortgage collateral (excluding prime securities). Mezzanine CMBS is estimated from an average spread among baskets of Putnam-monitored new issue and seasoned mezzanine securities, as well as a synthetic (CMBX) index. Agency IO is estimated from a basket of Putnam-monitored interest-only (IO) and inverse IO securities. Option-adjusted spread (OAS) measures the yield over duration equivalent Treasuries for securities with different embedded options.