Products February 22, 2011

Putnam Plans Absolute Return Fund for Variable Annuities

Putnam Investments plans to launch a version of its Absolute Return 500 Fund for use by insurance companies in variable annuities and other variable insurance products.
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The Putnam Variable Trust (VT) Absolute Return 500 Fund will be available for sale only to insurers and other firms issuing variable insurance products. It 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 advisers and their clients.  

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“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, in the announcement. “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.    

The trustees of the Putnam Funds have approved the proposed subaccount, and Putnam has filed the subaccount with the Securities and Exchange Commission (SEC). Subject to the required review and approval, 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.
Data & Research February 22, 2011

Participants Benefit from Advice, Survey Shows

The sampling size was small, but a recent survey found that participants who got financial advice held more funds and enjoyed a higher rate of return than those who didn’t.
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The study of 401(k) participants at twelve Midwest mid-size firms conducted by Francis Investment Counsel found that participants who received financial advice held an average of 8.67 funds versus 4.98 funds for those who did not receive advice.  In addition, those who received financial advice achieved a 3-year annualized rate of return ending 6/30/10 that was an average 2.67 percentage points better than those who did not receive advice. 

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Moreover, the average account balance for participants who utilized financial advice was $107,558 vs. $44,178 for those who did not.  Francis Investment Counsel LLC, a fee-only registered investment adviser (RIA), retrieved personal rate of return and number of funds held from recordkeepers, the company reported.

“This survey demonstrates that face–to-face, one-on-one advice has a meaningful impact on participant returns,” said Kelli Send, Senior Vice President of Francis Investment Counsel LLC.  “As companies seek ways to help their employees better prepare for a comfortable retirement, this study suggests offering personalized education and advice is effective.”  

The twelve Midwest mid-size firms included in the study represent more than 7,400 plan participants.  Of these, a random sampling of approximately 25% of plan participants maintaining account balances was drawn for the survey.  These individuals were split into two study groups: those who had used Francis Investment Counsel one-on-one participant advisory services and those who did not.  

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