Putnam Investments is betting that actively managed products like its absolute-return funds will resonate more with skittish investors than index funds and exchange-traded products, which might be cheaper but mirror the market's volatility.
"Creating and preserving wealth is an active effort," said Robert L. Reynolds, president and CEO of Putnam Investments, during a recent online investment seminar. "Active management has to be part of everyone's strategy going forward."
Despite the market's rocky performance over the past decade, investment advisors have continued to press the "buy and hold" and "time in the market, not timing the market" adages on investors. Disillusioned investors may now be more willing to consider different strategies, such as absolute-return products.
"People have seen their savings take a big hit," said Kevin Murphy, a portfolio manager at Putnam. "They're looking for reliable income, not volatility."
Putnam's suite of absolute-return funds seek to mimic average market returns, without exposing investors to the market's volatility. By using fundamental research methods and stretching performance over a three-year average, Putnam's portfolio managers try to trim the volatility off markets and give investors a steady outcome.
"If we allow ourselves to be flexible, we can take back control of how markets affect us," said Jeff Knight, Putnam’s head of global asset allocation.
Reynolds said he sees absolute-return strategies playing a major role in retirement savings in the coming year. "We've always believed in protecting nest eggs as they approach retirement," he said. "The closer you get to your retirement date, the more you should utilize absolute return."
Reynolds said funds that aim to provide absolute-returns currently account for about 5% of the mutual fund space, but that's not enough. "In the next few years, we would like them to be 25% of the mutual fund space," he said. "They're that important."