SOURCE: Putnam Investments

Putnam Investments

February 22, 2011 10:17 ET

Putnam to Launch Absolute Return Fund for Use in Variable Annuities

New Putnam Fund Will Provide Annuitants With Access to Absolute Return Strategies

BOSTON, MA--(Marketwire - February 22, 2011) - Putnam Investments today announced that it plans to launch a version of its Absolute Return 500 Fund for use by insurance companies in variable annuities and other variable insurance products that they offer customers. 

The Putnam Variable Trust (VT) Absolute Return 500 Fund, which will be available for sale only to insurers and other firms issuing variable insurance products, is designed to seek a positive return that exceeds the rate of inflation, as reflected by Treasury bills, by 5% over a reasonable period of time (generally at least three-years or more) regardless of market conditions. The subaccount's strategies are also generally intended to produce lower volatility than historically associated with traditional asset classes that have earned similar level of return.

The new variable trust offering will join the Putnam 529 for America and Putnam RetirementReady (lifecycle) funds as investment vehicles that make Putnam absolute return strategies available to advisors and their clients.

"The Putnam VT Absolute Return 500 Fund meets a growing demand by insurers for a variable insurance counterpart to our retail Putnam Absolute Return 500 Fund that they could incorporate into their annuity and life insurance platforms," said Putnam's President and Chief Executive Officer Robert L. Reynolds. "This subaccount aims for targeted return with managed volatility that insurers can use in assembling portfolios to help meet their variable products' investment, risk and volatility objectives. 

"This new application is fresh evidence of the great potential that absolute return strategies have to meet a wide variety of investment goals," Reynolds explained.

The trustees of the Putnam Funds have approved the proposed subaccount, and Putnam has filed the subaccount with the U.S. Securities and Exchange Commission. Subject to the required review the Putnam VT Absolute Return 500 Fund will be launched in spring 2011.

The Putnam VT Absolute Return 500 Fund will be managed by the same team of portfolio managers and in the same manner as the retail Absolute Return 500 Fund, led by Jeffrey L. Knight, Head of Global Asset Allocation. It will be a diversified fund with the objective of seeking a positive total return that exceeds the rate of inflation by 500 basis points over a reasonable period of time (generally at least three-years or more) regardless of market conditions. 

In order to achieve its goals, the Putnam VT Absolute Return 500 Fund will combine two independent investment strategies: A beta strategy that seeks to balance risk and provide positive total return through a comprehensively diversified, multi-asset class market portfolio with broad exposure to investment markets; and an alpha strategy with a variety of active trading tactics that employ security selection, tactical asset allocation, , currency transactions and options transactions.

"Absolute return strategies, in general, can help address a variety of retirement-related investment concerns, including market volatility, the need for more dependable streams of income, the potential for inflation and longevity risk," said Reynolds. "This makes such strategies especially appropriate for inclusion in variable insurance products, and enables investors in annuities to benefit from the same investment approach and management employed by the retail Putnam Absolute Return 500 Fund."

Putnam Investments and Absolute Return 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 help stabilize fund performance. Currently, the Putnam Absolute Return Funds are closing in on $3 billion in assets under management. Nearly 10,000 advisors from more than 500 broker-dealers have used Putnam absolute return products in portfolio construction.

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

Putnam 529 for America became the first 529 college savings program to include absolute return strategies when the program launched last September. The inclusion of the full suite of Putnam Absolute Return Funds in the Nevada-sponsored plan is also designed to dampen the effects of volatility and help produce a more reliable sequence of investment returns, especially as an investor gets closer to paying college tuition.

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 January 2011, Putnam had $123 billion in assets under management, including mutual fund assets of $68 billion and institutional assets of $55 billion. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, visit putnam.com.

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.

There are substantial differences between variable annuities and the mutual funds, including insurance-related fees and charges. Annuities are long-term investment vehicles intended for retirement planning. Annuities have insurance-related charges and tax considerations and are offered by contract only.

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