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

Multi-Asset Absolute Return Fund (Class Y)  (PDMYX)

Seeks positive returns with a similar level of volatility

Q2 2020 | Multi-Asset Absolute Return Fund Q&A

  • Global equity markets rallied significantly in response to government and central bank stimulus measures.
  • Non-directional strategies detracted from performance, while directional strategies contributed.
  • The fund had near-neutral positioning at quarter-end as markets continued to absorb the economic im-pact of the COVID-19 pandemic.

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

In sharp contrast to the first quarter, global equity markets rose quickly during the second quarter. Stimulus measures introduced by governments and central banks to help ensure the orderly functioning of financial markets and ease recessionary pressures resulting from the pandemic had a positive effect. These aggressive and historic policies eased investors' fears, sparking the rally in risk assets. With prospects for economies reopening and infection rates declining, April was an exceptionally strong month. The S&P 500 Index, a broad measure of U.S. stocks, and the MSCI World Index (ND) registered returns of 20.54% and 19.36%, respectively, for the quarter.

Rate-sensitive fixed income held up as well, as interest rates and inflation risk remained low. With investor sentiment improving, high-yield bonds saw significant gains. Commodity prices rose as economies reopened, and member nations of the Organization of the Petroleum Exporting Countries [OPEC] continued to reduce inventories. The Bloomberg Barclays U.S. Aggregate Bond Index posted a return of 2.90% for the three-month period. The yield on the benchmark 10-year Treasury note declined to 0.66% by the end of the quarter from 0.70% 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 June 30, 2020?

The fund's class Y shares recorded a -1.21% decline, underperforming the cash benchmark, the ICE BofA U.S. Treasury Bill Index, which posted a return of 0.02%.

What factors had the biggest influence on performance?

Directional strategies were positive contributors in the second quarter. The fund benefited most from its exposure to commodities during the quarter. Equity market performance was positive, but active management led to a slightly negative contribution from directional equity performance overall. This result was due to the portfolio's slight underweight position in equities. Rate-sensitive fixed-income outperformed, but active management offset some of these gains. Our slight underweight position to interest-rate risk also detracted from performance results. Credit exposures were slightly additive.

Non-directional performance detracted from results in the second quarter. Equity-selection alpha strategies weighed on performance. Quantitative equity long/short strategies in emerging markets and our low-beta stock selection strategy accounted for this result. These strategies are designed to perform independently of global stock markets. Our forensic accounting strategy, which seeks to identify companies that utilize aggressive accounting practices and profit from their stock price movement, was a notable positive.

Within fixed income, our selection alpha strategy detracted from results. This was largely due to a selection strategy focused on structured mortgage credit. Our regional fixed-income strategy slightly underperformed mostly due to its underweight duration positioning. Our alternative beta strategy was a detractor, driven by underperformance in cross-asset trend strategies. Finally, our commodity alpha strategy was a notable positive within non-directional.

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

The fund is positioned close to neutral as we enter the third quarter and global economies are slowly opening. The portfolio is currently positioned to be slightly underweight equity and interest-rate risk, neutral in terms of commodity risk, and slightly overweight credit risk. Diversification, a hallmark of our strategy, has continued to be beneficial.

What is your outlook for the global economy?

Markets rebounded in the second quarter as governments and central banks introduced historic stimulus measures to offset the effects of economic shutdowns. Credit market liquidity continues to improve. Spreads have tightened, and yields have fallen. [Credit spreads represent the difference in yield between two bonds of similar maturity but different credit quality.] The Fed continues to stand as a backstop to spread widening with the purchase of investment-grade corporates.

In equities, we remain close to neutral as the situation remains highly fluid. Markets are still working to assess the economic impact of this public health challenge. U.S. Treasuries continue to be in high demand relative to other developed government bonds. That said, economic weakness and a potential second wave of COVID-19 and ensuing economic shutdowns could cause the bellwether 10-year Treasury to test the lower bounds of the Fed's target range of 0%–0.25%.

Oil prices continue to increase in response to improved investor sentiment. OPEC has managed to re-establish cooperation among its members. However, we see downside risks until demand becomes more robust and the ongoing OPEC cuts lower inventories further.

Against this backdrop, we continue to look for signs of stabilization and any progress on the medical front to help stop the spread of COVID-19.

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 $10.83
-0.09% | $-0.01
$11.85
09/04/19
$10.37
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.

6.77%

Best 5-year annualized return

(for period ending 03/31/14)


-0.17%

Worst 5-year annualized return

(for period ending 06/30/20)


3.72%

Average 5-year annualized return


Fund facts as of 07/31/20

Total net assets
$930.26M
Turnover (fiscal year end)
638%
Dividend frequency
Annually
Number of holdings
731
Fiscal year-end
October
CUSIP / Fund code
746764257 / 1861
Inception date
12/23/08
Category
Absolute Return
Open to new investors
Ticker
PDMYX

Management team

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


Performance

  • Total return (%) as of 06/30/20

  • Annual performance as of 06/30/20

Annualized Total return (%) as of 06/30/20

Annualized performance 1 yr. 3 yrs. 5 yrs. 10 yrs.
Before sales charge -8.15% -1.72% -0.13% 2.56%
After sales charge N/A N/A N/A N/A
ICE BofA U.S. Treasury Bill Index 1.71%1.80%1.22%0.66%

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, R6, 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 07/31/20 2.55% -
YTD as of 08/07/20 -4.50% -

Volatility as of 06/30/20

Standard deviation (3 yrs.) 5.35%

Morningstar Ratings as of 06/30/20

Time period Funds in category Morningstar Rating
Overall 252
3 yrs. 252
5 yrs. 191
10 yrs. 65
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 08/01/2049 9.05%
Fnma Fn30 Tba Umbs 02.5000 07/01/2050 6.47%
Fnma Fn30 Tba Umbs 04.0000 07/01/2050 5.65%
Baml Commodity Mlbx4sx6 Er Strategy 3x 144a Note 1/12/2021 2.24%
Citi Commod F3-F0 4x Levered Index 3x Note 1/25/2021 2.21%
Fnma Fn30 Tba Umbs 02.5000 08/01/2050 2.15%
Alibaba Group Holding 1.92%
Samsung Electronics 1.82%
Technology Select Sect Spdr Sedol 2369709 1.66%
Comm Serv Select Sector Spdr Sedol Bfxhc51 1.53%
Top 10 holdings, percent of portfolio 34.70%



Portfolio composition as of 06/30/20

U.S. Treasury/agency 46.29%
Agency pass-through 27.51%
U.S. stocks 12.44%
Commercial MBS 11.91%
Agency CMO 6.68%
Commodities 4.25%
Bank loans 1.34%
Residential MBS (non-agency) 1.20%
Asset-backed securities (ABS) 0.76%
Investment-grade corporate bonds 0.50%
High-yield corporate bonds -0.09%
International stocks -1.33%
Emerging-market stocks -1.99%
Net cash -4.70%
Emerging-market bonds -4.77%

Fixed income statistics as of 06/30/20

Average effective maturity 15.01 yrs.
Average effective duration 4.50 yrs.
Average yield to maturity 8.12%
Average coupon 4.55%

Maturity detail as of 06/30/20

0 - 1 yr. 10.91%
1 - 5 yrs. 101.58%
5 - 10 yrs. -13.74%
10 - 15 yrs. 1.13%
Over 15 yrs. 0.12%

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. 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. 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. 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. The fund’s prospectus lists additional risks.