When the former George Putnam Fund of Boston was founded in 1937, could anyone have foreseen that it would grow to be one of the oldest mutual funds and perhaps the first balanced portfolio?
Five years ago, lead manager Jeanne Mockard took over the $5.3 billion fund, which is one of Putnam Investments most conservative accounts. Her team includes equity and bond specialists who have created a portfolio of high-quality fixed-income securities and large-cap value stocks that yield favorable returns in a bull market and minimize losses in a down market, a report from BusinessWeek online indicates.
The fund gained 12.5% for the one-year period ending Aug. 12, while the S&P 500 index came in at 17.7% and the average U.S. balanced fund at 13.8%. The longer five-year timeframe has seen the fund beat the index and like funds increasing 5.1% versus its peers 2.1%, and a 2% loss for the benchmark index.
Volatility at 8.25% is just above the peer group's 8.13% average. The S&P ranking gives it 3 Stars based on the fund's risk and return profile.
The fund operates with three moving parts, with the bond and equity portions being actively managed and Mockard's team deciding on the most desirable allocation. They look for undervalued companies that are on the brink of an important price appreciation.
"We believe that well-established companies that pay regular dividends outperform the overall market over the long term," she said.
The Lehman Aggregate Index is used against the bond portion of the fund; consequently it is made up of high-quality corporate bonds, mortgage-backed securities and treasuries. Generally, they are securities that have intermediate to long-term maturities.
The fund's distribution is 55% to 65% in stocks and 35% to 45% in bonds. Assets as of July 31 were invested as follows: stocks 59.7%, mortgage-backed securities 25.7% and corporate bonds 11.2%.
As of the same date, among the fund's top 10 equity holding were Citigroup, Bank of America and ExxonMobil. Top industry sectors included financials, 26.7%, technology, 10.4%, and healthcare, 10.2% as of that date.
The last six to nine months have showed improved pricing for insurance carriers. Their stock prices have been lagging, however, which makes for a desirable investment.
While Mockard's investments are primarily in domestic stocks she is looking to China with its booming economy. She believes that it will have a big influence on businesses in the U.S. While there are no current plans to invest in Chinese stocks, Mockard feels that China's economy must be paid attention to especially in the energy sector. In addition to energy, she also feels that steel and other commodities will be affected.
"In fact, there are very few sectors of the U.S. economy that aren't looking at China to expand their business," she said.