Dynamic Risk Allocation Fund (PDREX)

An active approach to global balanced investing that seeks superior long-term total return without increased volatility

About this
fund with
Rob Schoen

Pursuing strong risk-adjusted returns with a flexible mix of four risks

Historically, 90% of the volatility in a 60/40 balanced portfolio has come from equities.*

Does your balanced portfolio take concentrated risks?

Putnam Dynamic Risk Allocation Fund pursues a better balance of risks.


Risk diversification: Actively diversifies sources of risk to offset stock volatility
Alternative assets: Invests in commodities, REITs, TIPS, and derivatives
Downside risk management: Employs strategies to help reduce portfolio risks


* Source: Putnam. The higher historical volatility of stocks may be evident in a traditional 60% stock/40% bond portfolio. Based on the past 40 years of historical stock and bond standard deviation data, stocks contributed approximately 90% of the overall risk of a 60/40 portfolio.



Fund highlights

A core holding to serve a variety of investors

Serves investors considering a core global fund with dynamic flexibility as part of a broader portfolio that includes stocks, bonds, cash, and alternatives.

A core mutual fund holding

Global deleveraging adds to market volatility

For much of the past 10 years, volatility has outweighed returns.

The reality of the new normal

Reducing volatility improved long-term performance

In the last market cycle, the best return came from the least volatile portfolio.

Losing less matters more in the long run
A core mutual fund holding The reality of the new normal Losing less matters more in the long run

Risk, as measured by standard deviation, gauges how widely a set of values varies from the mean. A "traditional 60/40" approach to diversification is represented by 60% S&P 500 Index and 40% Barclays U.S. Aggregate Index.

The Custom Dynamic Risk Allocation Index is comprised of 50% MSCI World Index, 40% Barclays Global Aggregate Bond Index, and 10% Goldman Sachs Commodity Index. MSCI World Index is a free float-adjusted market capitalization weighted index of equity securities that is designed to measure the equity market performance of developed markets. Barclays Capital Global Aggregate Bond Index is an unmanaged index of global investment-grade fixed-income securities. Goldman Sachs Commodity Index is a composite index of commodity sector returns that represents a broadly diversified, unleveraged, long-only position in commodity futures. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index.

Consider these risks before investing: International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk and the risk that they may increase in value less when interest rates decline and decline in value more when interest rates rise. Allocation of assets among asset classes may hurt performance, and efforts to diversify risk through the use of leverage and allocation decisions may not be successful. Derivatives carry additional risks, such as the inability to terminate or sell derivatives positions and the failure of the other party to meet its obligations. 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 greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Active trading strategies may lose money or not earn a return sufficient to cover trading and other costs. Use of leverage obtained through derivatives increases these risks by increasing investment exposure. Over- the-counter derivatives are also subject to the risk of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. REITs are subject to the risk of economic downturns that have an adverse impact on real estate markets. The use of short selling may result in losses if the securities appreciate in value. Commodities involve market, political, regulatory, and natural conditions risks. Stock and bond prices may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer or industry. You can lose money by investing in the fund.

You can lose money by investing in a fund. Any given fund may not achieve its goal, and is not intended as a complete investment program. All funds have risk. The value and/or returns of a portfolio will fluctuate with market conditions. You may have more or less than the original amount invested when you redeem your shares.