Chance to receive higher returns on equity

Leveraged companies possess strong upside potential for investors, including the potential to outperform the stock market.

Leveraged companies get a tailwind from economic recovery

Since these companies use debt heavily, they have had their best performance when credit was widely available, interest rates were low, and strong economic momentum supported business earnings.

Leveraged-company stocks, bonds, and bank loans were competitive with stocks during the last economic recovery, 12/31/01–12/31/06

Leveraged-company stocks, bonds and bank loans

In the recovery that followed the 2001 recession, leveraged-company stocks doubled the return of the S&P 500 Index. High-yield bonds and bank loans also provided strong returns in the same period.

Leveraged-company security indexes have remained competitive with stocks over the past four years, 12/31/09–12/31/13

Leveraged-company security indexes

Relative performance can vary in other time frames, but in the current recovery, leveraged-company stocks, high-yield bonds, and bank loans have once again shown their ability to perform well relative to the broad equity market.

Illustrations are for informational purposes only and do not reflect the performance of any Putnam fund, which will differ. Leveraged-company stocks are measured by the Credit Suisse Leveraged Equity Index, which comprises companies that issue high-yield corporate bonds included in the Credit Suisse High Yield Bond Index; stocks are measured by the S&P 500 Index, a broad measure of stock market performance; high-yield bonds are measured by the JPMorgan Developed High Yield Index, which represents high-yield fixed-income securities issued in developed countries; and bank loans are measured by the S&P/LSTA Leveraged Loan Index, which represents bank loans issued to leveraged companies. Indexes are unmanaged and do not reflect any fees or expenses, and you cannot invest directly in an index. Past performance is not indicative of future results, and results may differ over other performance periods.

« Why would a company become leveraged? Why Putnam for leveraged-company investing?

Consider these risks before investing: Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Our focus on leveraged companies and the funds' "non-diversified" status can increase the funds' vulnerability to these factors. The use of short selling may increase these risks. Stock prices may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer company or industry. You can lose money by investing in the funds. For Capital Spectrum, these risks also apply: Lower-rated bonds may offer higher yields in return for more risk. 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. Our use of short selling may increase these risks. 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. 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.