Putnam Investments today announced that it has launched the Putnam Dynamic Risk Allocation Fund (Class A: PDREX), designed to actively balance the sources of portfolio risk across multiple asset classes, with flexibility to respond dynamically to changing economic conditions and market valuations, in pursuit of consistent levels of total return. The Fund will make use of a risk parity approach that Putnam has utilized extensively for institutional clients.
The Putnam Dynamic Risk Allocation Fund is unlike a traditional balanced fund where the majority of the risk comes from the equity allocation. The new Putnam fund diversifies across a wide range of global markets reducing reliance on equities, to pursue a total return that is more consistent over different market conditions. By comparison, in a traditional asset allocation portfolio or balanced fund (60% equity/40% fixed income as defined by Lipper), the equity portion contributes nearly 90% of the portfolio risk.
In addition to conducting a rigorous risk analysis at the individual securities level, the new Putnam Fund will have an intense ‘risk lens’ at the asset allocation level. The Fund will be attempting to create more consistent performance over time by boosting exposure to less volatile and/or less correlated asset classes and diversifying its exposure to risk.
“Greater risk diversification across less volatile assets is essential for preservation and long-term growth of investment capital – and pursuing these objectives through a focused ‘risk’ lens can be a critical success factor,” said Robert L. Reynolds, President and Chief Executive Officer, Putnam Investments.
Another major distinguishing characteristic of the Putnam Dynamic Risk Allocation Fund is that the portfolio is not static: utilizing the expertise of the Putnam Global Asset Allocation team, the portfolio weightings will be dynamically adjusted in response to changing market conditions, providing the potential to further enhance performance and manage risk.
“Building off of our strong work in the institutional marketplace to seek total return with lower volatility than equities, we believe that seeking better risk diversification by asset class currently offered by the new Putnam fund creates the potential for the fund to produce solid performance in a variety of market environments, and as such, should be considered as a strong core holding in many different types of investments portfolios,” Reynolds continued.
Reynolds explained that the portfolio management team is accustomed to using a wide array of asset classes and investment tools to thoughtfully approach its investment mission. The fund has the ability to employ a variety of advanced strategies to conservatively control volatility and manage overall risk. In addition to a full spectrum of global equities and global fixed-income securities, Putnam Dynamic Risk Allocation Fund may invest in other asset classes such as commodities and real estate investment trusts, as well as other tools designed to mitigate risk, including the prudent use of leverage.
The Dynamic Risk Allocation Fund is managed by Putnam’s Global Asset Allocation team, led by Head of Global Asset Allocation Jeffrey L. Knight. The team’s specialists have more than 17 years of experience in managing multi-asset portfolios for both the institutional and retail marketplaces, including more than five years of managing portfolios employing a risk-parity approach. Beyond their own skills and resources, the team draws upon the knowledge of the larger Putnam investment organization.
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 one of the top 15 mutual fund families by Lipper/Barron’s for the second consecutive year. At the end of August 2011, Putnam had $122 billion in assets under management, including mutual fund assets of $62 billion and institutional assets of $60 billion. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit putnam.com.