Prior to April 30, 2018, the fund was known as Putnam Absolute Return 700 Fund.

Multi-Asset Absolute Return Fund (Class A)  (PDMAX)

Seeks positive returns with a similar level of volatility

Q1 2020 | Multi-Asset Absolute Return Fund Q&A

  • Equity and credit market conditions were turbulent, but active management helped mitigate losses.
  • Non-directional strategies detracted from performance, while directional strategies contributed.
  • During the quarter, our outlook for equity and credit risk slightly increased and our outlook for commodities/inflation risk slightly decreased.

What was the investment environment during the first quarter of 2020?

Global equity markets experienced a sharp sell-off during the quarter, particularly in its second half, as investors dealt with the spread of the coronavirus, a price war in the oil markets, and stressed liquidity. The S&P 500 Index, a broad measure of U.S. stocks, and the MSCI World Index registered returns of -19.60% and -21.05%, respectively, for the three-month period. Market worries drove many investors to seek safe-haven issues such as conservative fixed-income assets. Rate-sensitive bonds held up well as interest rates reached historic lows, but high-yield bonds experienced losses due to fears about deteriorating credit conditions. The Bloomberg Barclays U.S. Aggregate Bond Index, which measures the performance of investment-grade bonds, posted a return of 3.15% for the three-month period. Commodity prices tumbled as a result of Saudi Arabia and Russia engaging in a price war to increase crude oil market share, in part to offset the global demand destruction caused by the pandemic.

To help allay fears about the pandemic and head off weaker growth, central banks and governments around the globe injected vast amounts of monetary and fiscal stimulus into the financial system. For its part, the Federal Reserve lowered short-term interest rates effectively to zero and increased asset purchases to provide liquidity in the credit markets. Given the role that the U.S. dollar plays in the global financial system, these moves are helping to add stability to the global economy and are putting cash in the hands of U.S. consumers and businesses.

U.S. Treasury yields fell during the quarter. The yield on the benchmark 10-year Treasury note declined to 0.70% at the end of the quarter from 1.92% at the start of the period.

Before we discuss performance, would you summarize the fund’s overall investment objective and strategy?

Putnam Multi-Asset Absolute Return Fund seeks a positive return exceeding the return of Treasury bills over a reasonable period of time, regardless of market conditions. The fund seeks to achieve risk-and-return characteristics by dynamically allocating assets using a combination of directional [or market sensitive] and non-directional [or market neutral] strategies. We can manage both the composition and total level of risk, depending on market conditions and the prevailing opportunity set. The fund also employs strategies that may produce lower volatility over time.

How did the fund perform for the three months ended March 31, 2020?

The fund’s class Y shares recorded a -5.38% decline, underperforming the cash benchmark, the ICE BofA U.S. Treasury Bill Index.

What factors had the biggest influence on performance?

Directional exposures were additive in the first quarter. The strategy benefited significantly from exposure to interest rates as rates declined and prices rose.

Equity and credit market performance detracted from fund results, but active management helped mitigate losses. We benefited from underweight equity and credit positioning. Weak commodity performance also dampened returns, though this too was partially offset by a tactical underweight. These allocation decisions were especially beneficial for the fund during the height of market stress, when the S&P 500 lost over 33% from February 20 to March 23 and credit spreads widened to levels not seen since the 2007–2008 financial crisis.

Non-directional strategies weighed on performance for the quarter. Equity-selection alpha strategies, which are market-neutral trades designed to perform independently of global stock markets, detracted the most. Specifically, our forensic accounting long/short strategy was one of the largest sources of quarterly weakness. This strategy seeks to identify companies that utilize aggressive accounting practices and profit from their stock price movements. In fixed income, our quantitative regional fixed-income strategy underperformed, largely due to its underweight duration positioning. Fixed-income selection alpha also detracted, specifically a strategy focused on structured credit, which was primarily mortgages. Our commodity alpha strategy was a notable positive within non-directional.

How was the fund positioned at the start of the second quarter?

Overall, we have been and continue to be defensively positioned. Our current positioning includes underweights to equities and commodities. The portfolio is neutral in terms of credit risk and interest-rate risk.

We recently increased our equity position from significantly underweight to underweight. This decision was in response to favorable developments: a $2.2 trillion federal economic relief package, and quantitative signals of broad-based equity market strength. We expect stock market lows to be retested at some point, and this move provides latitude to increase our underweight in the future.

In fixed income, we decreased our rates recommendation just before quarter-end, moving from slightly overweight to neutral. The team believes economic risks are more balanced now given the liquidity injection by the Fed and the passage of the relief/stimulus package, the largest in U.S. history. In high yield, we moved from underweight to neutral as spreads reached a level where the asset class could absorb widespread defaults, in our view.

Overall portfolio risk is roughly balanced between directional and non-directional strategies, with a small tilt toward directional exposures. The majority of non-directional risk is in equity selection alpha strategies.

What is your outlook for the global economy?

We are closely monitoring the spread of the coronavirus, the impact of collapsed oil prices, and economic and financial disruptions across the credit markets. While the size of the fiscal response has been massive, we believe the United States has yet to experience the worst of the pandemic as the second quarter of 2020 begins. This could lead equity markets to retest recent lows. In rate-sensitive fixed income, we believe global central banks will continue to expand their balance sheets given the Federal Reserve’s promise of unlimited quantitative easing. All told, with the recent passage of the stimulus package, risks are starting to appear more balanced, in our view.

We will be looking for signs of stabilization, including continued normalization of liquidity in the credit markets, how effectively recently approved stimulus dollars are deployed, and any progress in the medical community of what is ultimately a medical challenge.

Highlights

Objective

The fund seeks positive total return.

Strategy and process

  • Targeting positive returns:The fund seeks positive returns with a similar level of volatility over a full market cycle.
  • Global flexibility:The strategy dynamically combines efficient beta and uncorrelated alpha strategies to create a well-diversified portfolio.
  • Diversification potential:Less influenced by traditional market risks, the fund can be an effective choice to improve portfolio efficiency.

Fund price

Yesterday’s close 52-week high 52-week low
Net asset value $10.41
-0.19% | $-0.02
$11.79
09/04/19
$10.31
03/24/20
(Optional)

Consistency of positive performance over five years

Performance represents 5-year returns in rolling quarter-end periods since inception.

Performance shown does not reflect the effects of any sales charges. Note that returns of 0.00% are counted as positive periods. For complete fund performance, please click on the performance tab.

6.55%

Best 5-year annualized return

(for period ending 03/31/14)


-0.38%

Worst 5-year annualized return

(for period ending 03/31/20)


3.62%

Average 5-year annualized return


Fund facts as of 04/30/20

Total net assets
$925.58M
Turnover (fiscal year end)
638%
Dividend frequency
Annually
Number of holdings
756
Fiscal year-end
October
CUSIP / Fund code
746764315 / 0061
Inception date
12/23/08
Category
Absolute Return
Open to new investors
Ticker
PDMAX

Management team

Chief Investment Officer, Global Asset Allocation
Co-Head of Global Asset Allocation
Co-Head of Global Asset Allocation
Portfolio Manager

Literature


Actively targeting inflation risk for retirement savers
We explain why a dynamic approach to hedging inflation risk in a target-date fund may be a better way to protect a retirement nest egg.
Market volatility returns to "old" normal
Our outlook for stock market volatility sees the levels reached in 2018 continuing, in part because these levels were close to the long-term norm.
Calibrate equity allocations with higher savings rates
Evidence of higher savings rates by plan participants make it reasonable to consider lower equity allocations across the glide path of target-date funds.

Performance

  • Total return (%) as of 03/31/20

  • Annual performance as of 03/31/20

Annualized Total return (%) as of 03/31/20

Annualized performance 1 yr. 3 yrs. 5 yrs. 10 yrs.
Before sales charge -4.99% -1.25% -0.38% 2.24%
After sales charge -10.45% -3.18% -1.55% 1.64%
ICE BofA U.S. Treasury Bill Index 2.38%1.86%1.22%0.67%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and 4.00% and 3.25% for income funds (2.25% for class A of Putnam Floating Rate Income Fund, Short-Term Municipal Income, Short Duration Bond Fund, and Fixed Income Absolute Return Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, Putnam Fixed Income Absolute Return Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, N, R, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Performance for class A, C, and Y shares of Putnam Mortgage Opportunities Fund before their inception is derived from the historical performance of class I shares, which have been adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares. Returns at public offering price (after sales charge) for class N shares reflect the current maximum initial sales charge of 1.50%. Class R5/R6 shares, available to qualified employee-benefit plans only, are sold without an initial sales charge and have no CDSC. Class Y shares are generally only available for corporate and institutional clients and have no initial sales charge. Performance for class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 04/30/20 -1.22% -6.90%
YTD as of 05/26/20 -7.71% -13.02%

Volatility as of 04/30/20

Standard deviation (3 yrs.) 5.36%

Morningstar Ratings as of 04/30/20

Time period Funds in category Morningstar Rating
Overall 241
3 yrs. 241
5 yrs. 201
10 yrs. 64
Morningstar category: Multialternative

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Past performance is not indicative of future results.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.


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Holdings

Fnma Fn30 Tba Umbs 03.5000 06/01/2050 4.80%
Fnma Fn30 Tba Umbs 02.5000 06/01/2050 4.05%
Fnma Fn30 Tba Umbs 04.0000 07/01/2050 4.03%
Fnma Fn30 Tba Umbs 02.5000 05/01/2050 3.94%
Fnma Fn30 Tba Umbs 03.5000 07/01/2050 2.86%
Baml Commodity Mlbx4sx6 Er Strategy 3x 144a Note 1/12/2021 2.29%
Citi Commod F3-F0 4x Levered Index 3x Note 1/25/2021 2.22%
Fnma Fn30 Tba Umbs 03.0000 06/01/2050 2.05%
Technology Select Sect Spdr Sedol 2369709 1.81%
Samsung Electronics 1.76%
Top 10 holdings, percent of portfolio 29.81%



Portfolio composition as of 04/30/20

Net cash 64.83%
Agency pass-through 28.15%
Commercial MBS 11.81%
Agency CMO 6.62%
Commodities 3.45%
International stocks 2.02%
Bank loans 1.79%
U.S. stocks 1.05%
Residential MBS (non-agency) 1.03%
Asset-backed securities (ABS) 0.89%
Investment-grade corporate bonds 0.49%
Emerging-market stocks -0.57%
High-yield corporate bonds -2.00%
Emerging-market bonds -4.68%
U.S. Treasury/agency -14.88%

Fixed income statistics as of 04/30/20

Average effective maturity 4.39 yrs.
Average effective duration 1.57 yrs.
Average yield to maturity 7.80%
Average coupon 4.69%

Maturity detail as of 04/30/20

0 - 1 yr. 6.88%
1 - 5 yrs. 112.09%
5 - 10 yrs. -19.92%
10 - 15 yrs. 0.84%
Over 15 yrs. 0.11%

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: Allocation of assets among asset classes may hurt performance. 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, asset class, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. 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. Unlike bonds, funds that invest in bonds have 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, 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. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. Our alpha strategy may lose money or not earn a return sufficient to cover associated trading and other costs. Our use of leverage obtained through derivatives increases these risks by increasing investment exposure. 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. The fund's efforts to produce lower-volatility returns may not be successful. The fund may not achieve its goal, and it is not intended to be a complete investment program. You can lose money by investing in the fund. The fund’s prospectus lists additional risks.


Expenses

Expense ratio

Class A Class B Class C Class R Class R6 Class Y
Total expense ratio 0.96% 1.71% 1.71% 1.21% 0.61% 0.71%
What you pay† 0.93% 1.68% 1.68% 1.18% 0.58% 0.68%

† The fund's expense ratio is taken from the most recent prospectus and is subject to change. What you pay reflects Putnam Management's decision to contractually limit expenses through 02/28/21

Sales charge

 Breakpoint Class A Class B Class C Class R Class R6 Class Y
$0-$49,999 5.75% / 5.00% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$50,000-$99,999 4.50% / 3.75% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$100,000-$249,999 3.50% / 2.75% -- 0.00% / 1.00% -- -- --
$250,000-$499,999 2.50% / 2.00% -- 0.00% / 1.00% -- -- --
$500,000-$999,999 0.00% / 1.00% -- -- -- -- --
$1M-$4M 0.00% / 1.00% -- -- -- -- --
$4M-$50M 0.00% / 0.50% -- -- -- -- --
$50M+ 0.00% / 0.25% -- -- -- -- --

CDSC

  Class A (sales for $500,000+) Class B Class C Class R Class R6 Class Y
0 to 9 mts. 1.00% 5.00% 1.00% -- -- --
9 to 12 mts. 1.00% 5.00% 1.00% -- -- --
2 yrs. 0.00% 4.00% 0.00% -- -- --
3 yrs. 0.00% 3.00% 0.00% -- -- --
4 yrs. 0.00% 3.00% 0.00% -- -- --
5 yrs. 0.00% 2.00% 0.00% -- -- --
6 yrs. 0.00% 1.00% 0.00% -- -- --
7+ yrs. 0.00% 0.00% 0.00% -- -- --

Trail commissions

  Class A Class B Class C Class R Class R6 Class Y
  0.25% 0.25% 1.00% 0.50% 0.00% 0.00%
  NA NA NA NA NA NA
  NA NA NA NA NA NA

For sales and trail commission information on purchases over $500,000 and participant-directed qualified retirement plans, see a Putnam fund prospectus and the statement of additional information.

The ICE BofA U.S. Treasury Bill Index is an unmanaged index that tracks the performance of U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market. Qualifying securities must have a remaining term of at least one month to final maturity and a minimum amount outstanding of $1 billion. You cannot invest directly in an index.

Each fund seeks to earn a positive total return that exceeds the rate of inflation by a targeted amount over a reasonable period of time regardless of market conditions. There can be no assurance that a fund will meet its objective. The fund is not intended to outperform stocks and bonds during strong market rallies. Consult your financial advisor to determine which fund fits into your investment goals and time horizon.

Consider these risks before investing: Allocation of assets among asset classes may hurt performance. 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, asset class, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. 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. Unlike bonds, funds that invest in bonds have 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, 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. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. Our alpha strategy may lose money or not earn a return sufficient to cover associated trading and other costs. Our use of leverage obtained through derivatives increases these risks by increasing investment exposure. 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. The fund's efforts to produce lower-volatility returns may not be successful. The fund may not achieve its goal, and it is not intended to be a complete investment program. You can lose money by investing in the fund. The fund’s prospectus lists additional risks.