Modern diversification for all markets

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1 Modern diversification for all markets Funds A wide range of securities. Modern risk management tools. Ultimate flexibility.

2 Traditional investing means a rollercoaster of highs and lows Markets can go in either direction at any time. Investors in traditional funds focused on stocks or bonds need to be able to stomach volatility. Avg. annualized return Indexes 12/31/02 12/31/17 n U.S. large-cap stocks 9.92% n Global high-yield bonds 9.11 n Emerging-market bonds 8.80 n International stocks 8.11 n U.S. corporate bonds 5.37 n U.S. bank loans 5.15 n U.S. mortgage securities 4.05 n U.S. government bonds 3.52 n Cash 1.28 n Commodities Fund definitions can be found on the back page Recovery is an uphill battle. For every 40% drop in value, it takes a gain of 67% to return to even.* Bear markets hurt. Several asset classes lost more than 10% in 2001 and more than 30% in UNPREDICTABLE From year to year, markets can move in either direction without warning. FRUSTRATING The top performers one year may be the bottom performers the next. UNFAIR Short-term ups and downs are greater than long-term returns. Index performance is not representative of the actual Fund performance. Additional information about the funds can be found at putnam.com.

3 Absolute return funds offer a distinctive approach to managing volatility Consider an alternative: Absolute return funds can be independent of market direction and can use specialized tools that seek to reduce specific risks. Advantages of absolute return investing Committed to more consistent results Absolute return strategies aim to be more independent of market volatility and pursue positive return objectives. Diversified across multiple investments Absolute return funds mix a variety of investments rather than follow just one area of the market. We use sophisticated investment tools and strategies to help investors pursue better risk-adjusted returns over time. A philosophy of low volatility Absolute return fund managers seek smoother performance with a better balance of return and risk. Robert L. Reynolds President and CEO Investments The funds are not intended to outperform stocks and bonds during strong market rallies. Consider these risks before investing: Allocation of assets among asset classes may hurt performance. Bond prices may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions of the risk of default, changes in government intervention, and factors related to a specific issuer. These factors may also lead to periods of high volatility and reduced liquidity in the bond markets. 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. Lower-rated bonds may offer higher yields in return for more risk. 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. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. The fund may not achieve its goal, and it is not intended to be a complete investment program. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. The fund s effort to produce lower-volatility returns may not be successful and may make it more difficult at times for the fund to achieve its targeted return. Under certain market conditions, the fund may accept greater-than-typical volatility to seek its targeted return. You can lose money by investing in the fund. The fund s prospectus lists additional risks. For the 500 Fund and 700 Fund, these risks also apply: Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Our alpha strategy may lose money or not earn a return sufficient to cover associated trading and other costs. Our use of leverage obtained through derivatives increases these risks by increasing investment exposure. 1

4 Funds pursue a balance of return and volatility A wide range of securities for diversification Each fund can invest across many different asset classes and can dynamically adjust as opportunities change. Ultimate flexibility to be independent of indexes Each portfolio has flexibility to invest anywhere, use any strategy, and avoid any unattractive investments. Modern investment tools seeking reduced risk The funds can use hedging strategies implemented with derivatives and cash securities to seek to reduce downside volatility. Our absolute return suite offers a choice of four funds Fund return and volatility goals Treasury bills T-bills +7% Why are T-bills part of the objective? T-bills +3% T-bills +5% Historically, T-bills have posted positive returns more consistently than stocks or bonds. T-bills +1% T-bills had positive returns in 91 of the past 92 years. 100 Fund 300 Fund 500 Fund 700 Fund The 100 Fund and 300 Fund pursue relatively lower levels of balanced returns and volatility by investing in a wide range of fixed-income strategies across global markets. The 500 Fund and 700 Fund pursue relatively greater levels of balanced returns and volatility by investing across fixed-income, equity, commodity, currency, and long/short strategies. 2

5 The funds are managed by experienced investors backed by deep resources 100 Fund and 300 Fund are managed by s Fixed Income team. D. William Kohli CIO, Fixed Income Industry since 1988 Albert Chan Portfolio Manager Industry since years of experience working together on the fixed income team Michael V. Salm Co-Head of Fixed Income Industry since 1989 Paul D. Scanlon, CFA Co-Head of Fixed Income Industry since years of team experience managing absolute return strategies 500 Fund and 700 Fund are managed by s Global Asset Allocation team. Robert J. Schoen CIO, Global Asset Allocation Industry since 1990 James A. Fetch Co-Head of GAA Industry since years of team experience managing global allocation portfolios together Jason R. Vaillancourt, CFA Co-Head of GAA Industry since years managing absolute return strategies The teams are supported by the full breadth and depth of s global asset allocation, fixed income, and equity research. 3

6 How Funds may be used in a portfolio today Funds can bring sophisticated investment strategies to bear in any investor s portfolio. As a portfolio complement or core component, they may help individuals pursue common investment goals: Preserve wealth For investors who are in or near retirement, preserving wealth is a critical goal. In this regard, Funds may be suitable investments to consider for strategies to reduce downside volatility or bear market risk. Diversify a portfolio Funds invest across a wide range of securities, sectors, markets, and risks. As alternative strategies, these funds can provide a differentiated return stream, one that is unlike the performance of traditional stock and bond funds. Mitigate volatility For investors who would like to reduce potential portfolio volatility, absolute return funds are worth considering. They are independent from traditional benchmarks and can pursue strategies that are not aligned with the direction of the overall stock or bond markets. Absolute return funds can also seek to mitigate specific types of risk, such as market volatility or interest-rate movements. For more information on Funds, speak with your financial representative or visit putnam.com for portfolio manager videos and fund commentaries. Diversification does not guarantee a profit or ensure against loss. It is possible to lose money in a diversified portfolio. 4

7 SYMBOLS 100 Fund 300 Fund 500 Fund 700 Fund Class A: PARTX Class A: PTRNX Class A: PJMDX Class A: PDMAX Class B: PARPX Class B: PTRBX Class B: PJMBX Class B: PDMBX Class C: PARQX Class C: PTRGX Class C: PJMCX Class C: PDMCX Class M: PARZX Class M: PZARX Class M: PJMMX Class M: PDMMX Class R: PRARX Class R: PTRKX Class R: PJMRX Class R: PDMRX Class Y: PARYX Class Y: PYTRX Class Y: PJMYX Class Y: PDMYX

8 1Source: InvesTech Research. 2Source: Standard & Poor s. Emerging-market bonds are represented by the JPMorgan Emerging Markets Bond Index Global Diversified, which is composed of U.S. dollar denominated Brady bonds, eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities. Global high-yield bonds are represented by the JPMorgan Developed High Yield Index, which is an unmanaged index of high-yield fixed-income securities issued in developed countries. U.S. corporate bonds are represented by the Bloomberg Barclays U.S. Corporate Bond Index, which is an unmanaged index of investment-grade corporate bonds. U.S. large-cap stocks are represented by the S&P 500 Index, which is an unmanaged index of common stock performance. U.S. mortgage securities are represented by the Bloomberg Barclays U.S. MBS Index, which covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). U.S. bank loans are represented by the S&P/LSTA Leveraged Loan Index (LLI), which is an unmanaged index of U.S. leveraged loans. U.S. government bonds are represented by the Bloomberg Barclays Government Bond Index, which is an unmanaged index of U.S. Treasury and government agency bonds. International stocks are represented by the MSCI EAFE Index (ND), which is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia. Cash is represented by the BofA Merrill Lynch U.S. 3-Month Treasury Bill Index, which is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace. Commodities are represented by the S&P GSCI, which is a composite index of commodity sector returns that represents a broadly diversified, unleveraged, long-only position in commodity futures. You cannot invest directly in an index. Request a prospectus or summary prospectus from your financial representative or by calling at The prospectus includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Retail Management Investments One Post Office Square Boston, MA putnam.com FB /18