Striving to help investors pull in higher retirement incomes, Putnam Investments has revamped its existing line of target date funds by integrating target absolute return strategies with traditional mutual funds.
By combining target absolute return and traditional mutual fund strategies into Putnam’s RetirementReady target date fund suite, Putnam says that “the funds will seek to mitigate market volatility and create a more stable sequencing of investment returns.”
Putnam and others in the fund industry have been engaged in the debate–along with the Securities and Exchange Commission and Department of Labor–about whether target date funds are creating the amount of income pre-retiree and retirees’ need–particularly since many of these funds that were heavily weighted in equities saw a significant downturn last year for those nearing retirement.
Using its 10 years of experience in offering absolute return strategies to institutional and high-net-worth investors, Robert Reynolds, president and CEO of Putnam Investments, said Putnam has found that “If you integrate the absolute return with a relative return [mutual fund strategy], you can get just as good a return [as using equities]–sometimes better–and more downside protection and much less volatility.”
In January, Putnam launched the industry’s first suite of target absolute return mutual funds that seek annualized total returns of 1%, 3%, 5%, or 7% above inflation as measured by Treasury bills over a period of three years or more. It is that suite of funds that will be woven into Putnam’s 10 RetirementReady target date funds’ glidepaths, with a greater allocation to absolute return strategies as the investor gets closer to retirement.
In an interview on September 22, Reynolds said that “The closer you get to retirement, the more allocations [you should have] to absolute return because again, you get more predictable returns and less volatility.”