Putnam CEO Reynolds Calls for a “New Generation” of Workplace Savings Plans with Lower Volatility & Lifetime Income Solut...
01 October 2009 - 11:30PM
Business Wire
Drawing what he described as “the right lessons” from last
year’s market extremes, Putnam Investments President and Chief
Executive Officer Robert L. Reynolds today called for a new
generation of workplace savings plans that do more to lower
volatility and create more dependable sources of lifetime
income.
“We need to do more to protect working Americans from the
inflation, volatility, and longevity risks that can make lifelong
security in retirement so hard to reach,” Reynolds said. He
explained that 401(k) plans should be made much more resistant to
market downturns, such as those experienced in 2008.
Speaking at the National Investment Company Service
Association’s (NICSA) East Coast Regional Meeting in Boston,
Reynolds said, “The Pension Protection Act of 2006 (PPA) has gone a
long way toward solving the challenge of savings accumulation.
Auto-enrollment, savings escalation, and asset allocation guidance
all work — but we need to finish the job. The next challenge in
workplace savings plans will be to offer guidelines, even
guardrails, to ensure that workers’ savings are protected as they
reach retirement age.”
Reynolds indicated that retirement plan sponsors, plan
administrators, financial advisors, and workers themselves should
consider a “lifetime financial product allocation” pattern that
includes:
- Reliable lifetime income options
(both annuities and non-annuity solutions), to protect against
longevity risk;
- Relative return strategies
(stock and bond funds, and asset allocation funds), to protect
against inflation risk; and,
- Absolute return strategies, to
protect against both inflation and volatility risk.
Asset managers, insurance companies, and service providers all
have significant roles to play in the development and distribution
of products for such a glide path, in which asset allocations — and
the relative share of investment and insurance services used —
would adjust steadily as a worker approaches and enters
retirement.
“Preserving Wealth Is An Active Endeavor”
Reynolds noted the potential danger of excessive reliance on
index funds and other passive investments as a core element of a
mature retirement portfolio, saying that “preserving wealth is an
active endeavor. Index funds and other passive investments that
track benchmarks are guaranteed to lose value when the markets they
track sink, as we saw happen to the investments of many workers
last year. People in or near retirement are not well served by
too-great a concentration of passive investments, thinking they are
a protection against a downturn.”
Reynolds’s remarks expanded upon his May 2009 retirement savings
challenge to the financial services industry: to strengthen 401(k)s
and other defined-contribution plans to more reliably deliver
lifelong income to workers. Reynolds’s “Workplace Savings 3.0”
concept built on the PPA’s principles of automatic enrollment,
automatic savings escalation, and guidance to lifecycle and
balanced fund allocation strategies — which he described as
“Workplace Savings 2.0.” This second-generation model, ratified by
the passage of the PPA, transformed the purely voluntary,
multi-choice 401(k) pattern that dominated the first generation —
“Workplace Savings 1.0” — from roughly 1980 to 2005. But in the
wake of the market trauma of 2008, Reynolds argued, there is need
for more change.
“Today,” Reynolds told his audience at NICSA, “America is moving
from a long era of leverage, consumption, and reckless excess to a
new respect for thrift, prudence, hard work, reasonable
risk-taking, and entrepreneurship. There is little we could do that
would contribute more to that change than re-booting our workplace
savings system and better linking a lifetime’s labor to more
secure, lifelong income.”
Leadership in Retirement Product Innovation
Putnam recently announced that its RetirementReady® Funds are
the industry’s first suite of target date funds that integrate
target absolute return strategies with traditional relative return
mutual funds. The enhancement is designed to lower volatility
during accumulation and to pursue a higher level of income for
investors in retirement. The suite of 10 dynamically managed funds,
each of which has a target date based on when investors expect to
begin withdrawing assets, will seek to better shield investors
close to or in retirement from market extremes, thereby creating a
more stable sequencing of investment returns. The funds strive to
do this without sacrificing the potential for gains in more
positive markets.
The first use of absolute return strategies in target date funds
is just the most recent step in Putnam’s commitment to the
retirement market. Earlier this year, Putnam launched a new
401(k)/defined-contribution platform for advisors and their plan
sponsor clients that provides them with highly flexible and
scalable services and solutions.
The application of absolute return strategies to lifecycle
investing exemplifies Putnam’s renewed leadership in product
innovation. During the past year, Putnam launched the industry’s
first suite of target Absolute Return Funds, which already have
attracted over $500 million in investments;* Spectrum Funds, which
invest in the securities of undervalued, leveraged companies; and
Global Sector Funds, which target stocks in dynamic sectors across
global markets.
NOTE: For more information on Putnam CEO Robert Reynolds’s
address to NICSA, please visit
www.theretirementsavingschallenge.com
About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money
management firm with over 70 years of investment experience. As of
August 31, 2009, Putnam had $110 billion in assets under
management. Putnam has offices in Boston, London, Frankfurt,
Amsterdam, Tokyo, Singapore, and Sydney. For more information, go
to putnam.com.
* Putnam’s target Absolute Return Funds are not intended to
outperform stocks and bonds during strong market rallies.
Putnam mutual funds are distributed by Putnam Retail
Management.
Putnam Global Utilities Fund Class A (MM) (NASDAQ:PUGIX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Putnam Global Utilities Fund Class A (MM) (NASDAQ:PUGIX)
Historical Stock Chart
From Jul 2023 to Jul 2024