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National Survey Finds Three-Quarters of Financial Advisors Familiar with Absolute Return Strategies and Close to Sixty Percent Likely to Recommend Absolute Return Strategies to Their Clients

As absolute return investment strategies capture a growing share of investor assets, financial advisors are likely to recommend funds using these strategies to their clients, and many may use absolute return funds in the next 12 months, according to a new national survey released today by Putnam Investments who contracted with Brightwork Partners LLC, to conduct the telephone survey of 256 financial advisors and brokers across all channels, who actively advise retail investors and have been in the business for three years or more.

“These results suggest that we are just beginning to see absolute return investing break into the mainstream,” said Putnam CEO Robert Reynolds. “Investor and advisor interest in these solutions is growing.”

The survey found that three-quarters of advisors (76%) said they were familiar with absolute return strategies and more than half (59%) said they were at least somewhat likely to recommend funds that employ those strategies to their clients. Most immediately, absolute return strategies are particularly attractive to advisors looking to manage risk while moving clients out of cash or bonds in a rising market: Three in five advisors (59%) said that a major strength of absolute return funds was minimizing portfolio volatility and half (52%) saw their chief use as serving as an asset class diversification strategy. In addition to the thousands of advisors already positioning absolute return funds with their clients, about one advisor in five is very likely to “test drive” an absolute return fund in the year ahead, and about one in three may consider using absolute return funds in the next 12 months.

The results were released at the Absolute Return Symposium, a Putnam-sponsored educational forum on absolute return investing held today in New York that featured an array of practicing experts in the field. The speakers explored the universe of absolute return strategies in today’s marketplace and commented on the uses and effectiveness of these strategies, especially in helping to mitigate volatility and serving as an asset class diversification strategy.

“In the uncertain markets of the past couple of years, managing volatility has been an important objective for most advisors and their clients. The increasing receptivity of retail advisors to absolute return strategies as a way to seek to alleviate market volatility may reflect a growing confidence that these strategies can be an effective way for investors to help stabilize their portfolios while pursuing more reliable returns,” said Reynolds, speaking at the symposium.

Absolute return strategies seek to earn a positive total return over a full market cycle with less volatility than traditional funds and performance that is largely independent of market conditions. An absolute return strategy can outperform broad market indexes during periods of flat or negative market performance.

The advisors surveyed by Putnam are bullish, with four in five (81%) expecting the stock market to be higher a year from now, three-fifths (63%) expecting the same of GDP growth and 58 percent expecting the unemployment rate to be lower. With optimism on the rise, more than half (56%) of the advisors expect to increase their clients’ allocation to equities over the next year, and a third (33%) expect to increase their allocation to alternative investments. Just one in seven (14%) foresee an increased allocation to fixed income and only 5 percent envision allocating more to cash over the coming year.

However, the advisors do see some warning signs on the horizon. Nearly half (45%) believe inflation will be higher, and 57 percent think the same of long-term interest rates. These trends could threaten their ability to achieve the goals they think are most important for their clients, including seeking to deliver secure and adequate retirement income for clients (cited by 88%), helping their retired clients pace portfolio withdrawals appropriately (86%), helping clients keep up with inflation (74%) and securing adequate returns in view of market volatility (66%).

Although 69% of advisors still consider the traditional portfolio construction of stocks and bonds as a way to diversify client portfolios, one-quarter consider the return philosophy of various instruments, including relative return versus absolute return as a great diversification strategy.

“It’s clear that most advisors are familiar with absolute return strategies, how they are constructed and how they are used. However, there is still a need for greater understanding of when these strategies are appropriate for a portfolio and the importance that absolute return strategies play in diversification,” said Jeffrey L. Knight, Head of Global Asset Allocation, Putnam Investments, who co-manages the Putnam Absolute Return Funds.

Among other financial professionals speaking at the symposium were Cathy Saunders, Head of RIA Business, Putnam Investments; Merl W. Baker, Principal, Brightwork Partners LLC; Dr. Gabriel Burstein, Global Head of Portfolio Solutions and Investment, Research, Lipper Thomson Reuters; and Cynthia F. Steer, Chief Research Strategist, Rogerscasey.

Putnam and Absolute Strategies

Putnam Investments launched the mutual fund industry’s first suite of Absolute Return Funds in January 2009 with four funds:

  • Putnam Absolute Return 100 Fund (Class A: PARTX) seeks to outperform inflation by 1% over periods of three years or more net of all fund expenses as measured by T-bills, and can be an alternative to short-term securities
  • Putnam Absolute Return 300 Fund (Class A: PTRNX) seeks to outperform inflation by 3% over periods of three years or more net of all fund expenses as measured by T-bills, and can be an alternative to bond funds
  • Putnam Absolute Return 500 Fund (Class A: PJMDX) seeks to outperform inflation by 5% over periods of three years or more net of all fund expenses as measured by T-bills, and can be an alternative to balanced funds
  • Putnam Absolute Return 700 Fund (Class A: PDMAX) seeks to outperform inflation by 7% over periods of three years or more net of all fund expenses as measured by T-bills, and can be an alternative to stock funds

Putnam Absolute Return Funds have employed diverse strategies to help manage risk, including investments across sectors; short-maturity fixed-income securities; derivatives to hedge against market declines; Treasury futures contracts to reduce interest-rate risk; and cash positions to stabilize fund performance. Currently, Putnam Absolute Return Funds are closing in on $3 billion in gross sales. Nearly 9,000 advisors from over 500 broker-dealers have used Putnam absolute return products in portfolio construction.

Putnam RetirementReady® Funds, the firm’s suite of 10 target-date/lifecycle retirement funds, include target Absolute Return Funds* in its mix of underlying investments. RetirementReady Funds became the only suite of lifecycle funds to integrate absolute return strategies, which seek positive returns over time with less volatility than more traditional mutual funds. Employed in retirement portfolios, absolute return strategies are intended to pursue positive returns in up and down markets, to protect against the harmful effects of adverse investment returns, and to reduce volatility, particularly for investors in or near retirement.

Putnam Advisor/Broker Survey on Absolute Return Strategies

The findings are based on a telephone survey of 256 financial advisors and brokers from banks, wirehouses and independent firms conducted for Putnam Investments by Brightwork Partners from October 13-November 1, 2010.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. The firm was recently named “Mutual Fund Manager of the Year” by Institutional Investor. At the end of October 2010, Putnam had $118 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, visit

Putnam mutual funds are distributed by Putnam Retail Management.

* Putnam’s Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.


Putnam Media Contacts:
Jon Goldstein, 617-760-1127 (office)
516-946-5598 (cell)
Laura McNamara, 617-760-1108 (office)
617-850-2727 (cell)
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