How an active core strategy can benefit equity investors

How an active core strategy can benefit equity investors

Putnam’s active approach to investing in the multi-cap core universe offers many benefits, we believe. Here’s why we think investors should consider this approach.

Putnam Core Equity Fund (Y share, PMYYX) offers a long-term record of outperformance

Putnam Core Equity Fund (Y shares, PMYYX) has outperformed the benchmark Russell 3000 Index since inception

Source: Putnam. Fund inception is 9/24/10.

PMYYX and benchmark annualized total return performance as of September 30, 2022

PMYYX and benchmark total return performance as of 9/30/21

Source: Putnam. PMYYX expense ratio is 0.71%.

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes.

The power of consistency and compounding in Putnam Core Equity Fund’s process yields impressive absolute and relative results:
From the fund’s inception on 9/24/10, Putnam Core Equity Fund (PMYYX) returned 345% at NAV on a cumulative basis versus 283% for the Russell 3000 Index, a total return over 62 percentage points higher than that of the benchmark. On an annualized basis at NAV over this time period, the fund outperformed the index by 1.40%.

Flexibility to invest in best ideas regardless of style:
With Putnam Core Equity Fund, we offer a quality, diversified portfolio that can harness new opportunities that emerge in the market. We believe this approach has potential benefits for investors as it can help avoid performance chasing. Furthermore, in today’s more volatile market environment, we believe the flexibility to invest in best ideas across both value and growth style companies provides attractive optionality for investors. But the fund can also invest in best ideas across the growth universe.

With this flexibility and skilled stock selection, the strategy has an impressive performance record versus the Russell 3000 Index and core equity peers.

Strong long-term outperformance versus peers, including passive peers:
The portfolio ranks in the first percentile of its Morningstar peer group since inception with an attractive risk profile. The fund’s Y share ranks above all peers — passive and active — for the since-inception periods through 9/30/22. PMYYX has 53 passive peers and 215 active peers in the same share class for the since-inception period.

PMYYX since-inception returns rank in top percentile of Morningstar Large Blend group Y-share funds

PMYYX since-inception returns rank in top percentile of Morningstar Large Blend group Y share funds

Source: Morningstar. The passive peers group includes any funds or ETFs in the Large Blend category that are flagged as index funds in the Morningstar Direct database.

PMYYX rankings in the Morningstar Large Blend group

MYYX rankings in the Morningstar Large Blend group

Source: Morningstar.

Consistency is key:
As of September 30, 2022, the portfolio ranks in the top quintile over the 3-, 5-, and 10-year time frames. The portfolio ranks in the 2nd and 1st percentiles over the 10-year and since inception time frames, respectively. Notably, Portfolio Manager Jerry Sullivan has managed the fund since it’s launch in 2010. In terms of annual performance, PMYYX has never ranked in the bottom quintile of its Morningstar group or the bottom quartile of its Lipper group.

PMYYX has never ranked in the bottom quintile of Morningstar group or bottom quartile of Lipper group in any annual period

PMYYX annual performance has never ranked in the bottom quintile of Morningstar group or bottom quartile of Lipper group

Sources: Putnam, Morningstar, Lipper. PMYYX expense ratio is 0.71%.

Experienced portfolio management team supported by Putnam’s fundamental research team:
Portfolio Manager Gerard Sullivan has managed the fund since its inception and has over 40 years of experience in the investment industry. Portfolio Manager Arthur Yeager joined the portfolio team five years ago and also has over 35 years of investment industry experience.

Backed by a collaborative research environment with a time-tested analytical process:
Jerry and Arthur work together closely and are supported by Putnam’s sector-based research team, which is comprised of sector and industry experts.

Fundamental stock-selection process:
The Putnam Core Equity Fund process is driven by rigorous fundamental research. We seek to identify companies that are either temporarily mispriced by the market or that have long and durable runways for growth that will compound returns for years to come.

Key criteria we seek in companies for the portfolio

Key criteria we seek in companies for the portfolio

New idea categories: The team screens for ideas both quantitatively and then more narrowly into a few broad categories or “idea buckets,” including but not limited to:

  • Legacy names — These are stocks that have been followed by the fund managers for decades. These companies occasionally fall out of favor for reasons the managers may view as temporary and often provide an attractive entry point for the fund.
  • Smart money — The portfolio managers are especially attracted to companies with management teams that have a significant percentage of their personal net worth invested in company stock. Identifying such opportunities involves screening for heavy insider ownership, tracking the buying and selling activity of company insiders, and paying attention to the activity of other well-regarded investors. This can simply flag new ideas to do work on, or conversely provide an early warning for trouble in an existing holding that requires more due diligence.
  • Special situations — Special situations stocks tend to be more idiosyncratic in nature or tied to a differentiated story. These ideas would typically have an attractive risk/reward profile, but in some way do not fit a standard core holding. Examples could include busted IPOs, convertibles, SPACs, non-U.S. stocks, or other securities.

PMYYX, an active core equity strategy, offers a combination of attractive benefits for investors to consider — style and market-cap flexibility backed by rigorous fundamental research and led by seasoned managers — that has led to a record of outperformance versus its benchmark and peers.

Learn more about Putnam Core Equity Fund.

For Dealer Use Only – Not For Public Distribution

Consider these risks before investing: Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.

The Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. You cannot invest directly in an index. Russell® is a trademark of Frank Russell Company.

The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. The fund involves the risk that the stock prices of the companies in the portfolio will fall or will fail to rise. Many factors can adversely affect a stock’s performance, including both general financial market conditions and factors related to a specific company or industry.

Lipper and Morningstar rankings for class Y shares are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper and Morningstar. Morningstar rankings may differ significantly from Morningstar’s risk-adjusted star ratings. Source: Lipper, a Refinitiv company.

Your clients should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call the Putnam Client Engagement Center at 1-800-354-4000. Your clients should read the prospectus carefully before investing.


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