Active Income

Mortgage Opportunities Fund (Class Y)  (PMOYX)

A dynamic approach to securitized investing

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Mortgage Opportunities Fund (PMOYX)

Highlights

Objective

The portfolio seeks to maximize total return consistent with what Putnam believes to be prudent risk.

Strategy and process

  • Multiple securitized sectorsInvesting in residential and commercial MBS and collateralized mortgage obligations, the portfolio managers can pursue strategies independent of the direction of the U.S. housing market.
  • Portfolio diversificationSecuritized sectors offer effective diversification potential to portfolios with equity, corporate credit, and emerging market debt exposures.
  • Dynamic risk allocationOur differentiated approach actively allocates to credit, prepayment, and liquidity risks while deemphasizing interest-rate risk.

Fund price and assets

Net asset value
(yesterday’s close)		 $8.82
-0.11% | $-0.01
52-week high $9.33 (07/01/21)
52-week low $8.73 (12/20/21)
Net assets and outstanding shares Download CSV
(Optional)

Yield

Distribution rate before sales charge
as of 07/01/22		 4.76%
Distribution rate after sales charge
as of 07/01/22		 4.76%
30-day SEC yield with subsidy
as of 06/30/22		 4.89%
30-day SEC yield without subsidy
as of 06/30/22		 4.70%

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.

4.77%

Best 5-year annualized return

(for period ending 03/31/21)

2.08%

Worst 5-year annualized return

(for period ending 12/31/21)

2.86%

Average 5-year annualized return

Fund facts as of 05/31/22

Total net assets
$269.70M
Turnover (fiscal year end)
1,058%
Dividend frequency (view rate)
Monthly*
Number of holdings
814
Fiscal year-end
May
CUSIP / Fund code
74676A477 / 1886
Inception date
07/01/19
Category
Taxable Income
Open to new investors
Ticker
PMOYX

* On June 28, 2019, the Board of Trustees of Putnam Mortgage Opportunities Fund voted to change the frequency of the fund’s distributions from annual to monthly. The first monthly distribution is expected to take place in August 2019.

Management team

Michael V. Salm

Chief Investment Officer, Fixed Income

Brett S. Kozlowski, CFA

Co-Head of Structured Credit

Jatin Misra, PhD, CFA

Co-Head of Structured Credit

Commercial mortgage credit recovering from the pandemic

Portfolio Manager Brett Kozlowski, CFA, describes how Putnam focused its specialized expertise on the CMBS sector during the pandemic and how the team is finding compelling opportunities in that space.

Literature

A look at leveraged loans and CLOs
A recent Active Insights podcast features a discussion of leveraged loans, and collateralized loan obligations (CLOs).
U.S. recession ifs and whens
The U.S. will likely avoid a recession in 2022, in our view. That risk rises next year as the Fed raises rates and China decelerates.
Munis after Q1 — and April — and 8 reasons why we are still constructive
While munis suffered a bad quarter to start 2022, brighter days may be ahead amid strong fundamentals.

Performance

  • Total return (%) as of 06/30/22

  • Annual performance as of 06/30/22

Annualized Total return (%) as of 06/30/22

Annualized performance 1 yr. 3 yrs. 5 yrs. Life (inception: 07/01/19 )
Before sales charge 1.37% 0.14% 2.09% 2.42%
After sales charge N/A N/A N/A N/A
ICE BofA U.S. Treasury Bill Index 0.07%0.63%1.11%--
Bloomberg U.S. MBS Index -9.03%-1.44%0.36%--

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. The "before sales charge" performance does not reflect the current maximum sales charges, which we explain below. If performance did reflect the charges, it would be lower. The "after sales charge" performance (or returns at public offering price) varies by share class and fund. For class A and class M shares, the current maximum initial sales charges are 5.75% and 3.50% for equity funds and 4.00% and 3.25% for income funds, respectively (with these exceptions: 2.25% for class A of Putnam Floating Rate Income Fund, Short-Term Municipal Income, Short Duration Bond Fund, Strategic Intermediate Municipal Fund, and Fixed Income Absolute Return Fund). Class B share performance reflects the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, and Putnam Fixed Income Absolute Return Fund; for these funds, the CDSC is 1% in the first year, declines to 0.5% in the second year, and is eliminated thereafter). Class C share performance reflects 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 by adjusting for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (note, for two funds — Putnam Tax-Free High Yield Fund and Putnam Strategic Intermediate Municipal Fund performance prior to inception is 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 has been adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares. The "after sales charge" performance (at public offering price) for class N shares reflects the current maximum initial sales charge of 1.50%. Class R, R3, R4, R5, and R6 shares, which are 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 R3 and R4 shares prior to their inception is derived from the historical performance of class Y shares by adjusting for the higher operating expenses for such shares. Performance for class R5 shares before their inception is derived from the historical performance of class Y shares, which has not been adjusted for the lower expenses; had it been adjusted, performance would be higher (with the exception of the RetirementReady Maturity, 2025, 2030, 2035, and 2040 Funds, for which performance is derived from the historical performance of class R6 shares and has been adjusted for the higher operating expenses for such shares; and the RetirementReady 2045, 2050, 2055, and 2060 Funds, for which performance is derived from the historical performance of class R6 shares and has not been adjusted for the lower expenses; had it been adjusted, performance would be higher). Performance for class R6 shares before their inception is derived from the historical performance of class Y shares, which has not been adjusted for the lower operating expenses; had it been adjusted, performance would be higher. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses. Had these limits not been in place, performance would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 06/30/22 -0.40% -
YTD as of 07/01/22 3.08% -

Yield

Distribution rate before sales charge
as of 07/01/22		 4.76%
Distribution rate after sales charge
as of 07/01/22		 4.76%
30-day SEC yield with subsidy
as of 06/30/22		 4.89%
30-day SEC yield without subsidy
as of 06/30/22		 4.70%

Lipper rankings as of 05/31/22

Time period Rank/Funds in category Percentile ranking
1 yr. 32/139 23%
3 yrs. --  
5 yrs. --  
10 yrs. --  
Lipper category: Absolute Return Funds

Morningstar Ratings™ as of 05/31/22

Time period Funds in category Morningstar Rating™
Overall 300
3 yrs. 300
5 yrs. 265
Morningstar category: Nontraditional Bond

Distributions

Record/Ex dividend date 06/16/22
Payable date 06/21/22
Income $0.035
Extra income --
Short-term cap. gain --
Long-term cap. gain --

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.

Holdings

Fnma Fn30 Tba Umbs 04.5000 06/01/2052 20.75%
Fnma Fn30 Tba Umbs 03.0000 07/01/2052 3.18%
Fnma Fn30 Tba Umbs 04.5000 07/01/2052 1.13%
Stacr 2022-Hqa1 M2 05.8345 03/25/2042 0.99%
Fhr 5034 Ij Io 02.5000 11/25/2050 0.89%
Gnr 2020-173 Mi Io 02.5000 11/20/2050 0.76%
Fnr 2020-76 Gi Io 04.0000 11/25/2050 0.76%
Fnr 2020-99 Ib Io 03.5000 05/25/2050 0.75%
Fhr 5080 Iq Io 03.5000 04/25/2050 0.74%
Fnma Fn30 Tba Umbs 04.0000 06/01/2052 0.74%
Top 10 holdings, percent of portfolio 30.69%

Fixed income statistics as of 05/31/22

Average effective maturity 4.01 yrs.
Average effective duration 0.21 yrs.
Average yield to maturity 21.38%
Average coupon 4.58%

Sector weightings as of 05/31/22

  Cash investments Non-cash investments Total portfolio
  Weight Spread duration Weight Spread duration Weight Spread duration
Commercial MBS 18.05% 0.61 16.57% 0.15 34.62% 0.76
Agency CMO 30.84% 1.22 0.00% 0.00 30.84% 1.22
Residential MBS (non-agency) 17.50% 0.58 0.00% 0.00 17.50% 0.58
Agency pass-through 0.52% 0.02 15.85% 0.46 16.37% 0.48
Asset-backed securities (ABS) 2.09% 0.08 0.00% 0.00 2.09% 0.08
Interest rate swaps 0.00% 0.00 0.00% -3.16 0.00% -3.16
Net cash 31.00% 0.00 0.00% 0.00 31.00% 0.00

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 derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities.

Maturity detail as of 05/31/22

0 - 1 yr. 18.02%
1 - 5 yrs. 52.50%
5 - 10 yrs. 33.97%
10 - 15 yrs. -5.03%
Over 15 yrs. 0.54%

Quality rating as of 05/31/22

AAA 55.59%
AA 0.28%
A 11.22%
BBB 10.41%
BB 5.48%
B 3.83%
CCC and Below 3.69%
Not Rated 9.50%

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: 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.

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). Default risk is generally higher for non-qualified mortgages. Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Mortgage- and asset-backed securities are subject to prepayment risk and the risk 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'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 concentration in an industry group comprising privately issued residential and commercial 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 and the servicing of mortgage loans secured by real estate properties.

The fund currently has significant investment exposure to commercial mortgage-backed securities, which, during periods of difficult economic conditions, may experience an increase in delinquencies and losses as a result of the effects of those conditions on commercial real estate markets, the ability of commercial tenants to make loan payments, and the ability of a property to attract and retain commercial tenants. 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. Our use of short selling may result in losses if the securities appreciate in value.

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.

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.

Expenses

Expense ratio

 Class A Class C Class R6 Class Y
Total expense ratio 1.03% 1.78% 0.79% 0.78%
What you pay† 0.76% 1.51% 0.52% 0.51%

† 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 09/30/22

Sales charge

 Breakpoint Class A Class C Class R6 Class Y
$0-$49,999 4.00% / 3.50% 0.00% / 1.00% -- --
$50,000-$99,999 4.00% / 3.50% 0.00% / 1.00% -- --
$100,000-$249,999 3.25% / 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 C Class R6 Class Y
0 to 9 mts. 1.00% 1.00% -- --
9 to 12 mts. 1.00% 1.00% -- --
2 yrs. 0.00% 0.00% -- --
3 yrs. 0.00% 0.00% -- --
4 yrs. 0.00% 0.00% -- --
5 yrs. 0.00% 0.00% -- --
6 yrs. 0.00% 0.00% -- --
7+ yrs. 0.00% 0.00% -- --

Trail commissions

  Class A Class C Class R6 Class Y
  0.25% 1.00% 0.00% 0.00%
  NA NA NA NA
  NA NA NA NA

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. The Bloomberg U.S. MBS Index covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). You cannot invest directly in an index.

Consider these risks before investing: 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.

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). Default risk is generally higher for non-qualified mortgages. Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Mortgage- and asset-backed securities are subject to prepayment risk and the risk 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'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 concentration in an industry group comprising privately issued residential and commercial 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 and the servicing of mortgage loans secured by real estate properties.

The fund currently has significant investment exposure to commercial mortgage-backed securities, which, during periods of difficult economic conditions, may experience an increase in delinquencies and losses as a result of the effects of those conditions on commercial real estate markets, the ability of commercial tenants to make loan payments, and the ability of a property to attract and retain commercial tenants. 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. Our use of short selling may result in losses if the securities appreciate in value.

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.

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.