Putnam Dynamic Risk Allocation Fund combines flexible risk exposures with active decisions.

To improve on traditional balanced portfolios, we've developed a flexible and active approach that reduces the traditional reliance on equities. The goal is a better investment experience through full market cycles, measured by higher Sharpe ratios.

Why focus on higher Sharpe ratios?

A Sharpe ratio measures how well the return of an asset compensated an investor for the risk taken. The higher the Sharpe ratio, the greater the return per unit of risk.

Allocation by risk, not assets A risk-based allocation with a better balance of equity risk EXPAND

Equity risk is balanced with three other risk sources found in a range of global investments.

Risk Based Grid
Dynamic top-down allocation focused on risk-adjusted returns Dynamic top-down allocation focused on risk-adjusted returns EXPAND

The portfolio managers adjust the portfolio to harness more attractive Sharpe ratios.

Risk-adjusted returns (Sharpe ratios) vary over time

5-year rolling period Sharpe ratios, 12/31/89 - 12/31/12

Risk-adjusted Sharp Ratios

Source: Putnam. Equity represented by S&P 500 Total Return Index, credit represented by Barclays U.S. Corporate High Yield TR Index, interest rate represented by Barclays Intermediate U.S. Treasury Index, and inflation represented by S&P GSCI.

Active, bottom-up strategies within asset classes Active, bottom-up strategies within asset classes EXPAND

To add to performance and seek to reduce risk, the portfolio managers identify and implement individual strategies within asset classes.

« Why is risk allocation important? What role can the fund play in a portfolio? »

Standard deviation measures how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a 3-year period.

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.