Dynamic Asset Allocation Growth Fund Semi-Annual Report

116 Pages·2016·5.4 MB·English

Putnam Dynamic
Asset Allocation
Growth Fund
Semiannual report
3 | 31 | 22
Asset allocation funds invest
in a mix of many different types
of investments to help weather
changing market environments.
FUND SYMBOL
CLASS A
PAEAX
Putnam Dynamic
Asset Allocation
Growth Fund
Semiannual report
3 |31 |22
Message from the Trustees 1
About the fund 2
Interview with your fund’s portfolio manager 6
Your fund’s performance 11
Your fund’s expenses 13
Consider these risks before investing 15
Terms and definitions 16
Other information for shareholders 18
Financial statements 19
Message from the Trustees
May 9, 2022
Dear Fellow Shareholder:
Financial markets have been bumpy in recent months. Investors are weighing the risks of
higher inflation, interest-rate increases by the Federal Reserve, and the global impact of
Russia’s attack on Ukraine. Regional surges in Covid-19 infections are also complicating
global trade.
In times like these, it’s worth remembering the benefits of staying focused on your
long-term financial goals. At Putnam, professional, active investors are working for you.
They are monitoring risks while looking for strong potential investments for your fund.
Learn more in the interview with your fund manager(s) in the following pages.
Thank you for investing with Putnam.
Respectfully yours,
Robert L. Reynolds Kenneth R. Leibler
President and Chief Executive Officer Chair, Board of Trustees
Putnam Investments
About the fund
A diversified portfolio
pursuing growth worldwide
Putnam Dynamic Asset Allocation Growth Fund is designed for investors seeking
capital appreciation. The fund’s target mix of 80% stocks and 20% bonds has been
developed to pursue this goal while moderating investment volatility.
The managers believe that spreading fund holdings across a variety of asset classes
can help to smooth performance compared with the more extreme market ups and
downs that can happen when investing in only one type of asset.
Active global research guides our portfolio decisions.
Today, trends can spread quickly from one part of the world to affect markets everywhere.
The portfolio managers of Putnam’s Global Asset Allocation group have extensive
experience analyzing how opportunities and risks are connected across borders.
They follow a disciplined process to adjust the portfolio as market conditions change.
Robert J. Schoen Brett S. Goldstein, CFA
Co-Chief Investment Officer, Co-Chief Investment Officer,
Global Asset Allocation Global Asset Allocation
Industry since 1990 Industry since 2010
At Putnam since 1997 At Putnam since 2010
Adrian H. Chan, CFA James A. Fetch
Portfolio Manager Head of Portfolio Construction
Industry since 2003 Industry since 1994
At Putnam since 2003 At Putnam since 1994
2 Dynamic Asset Allocation Growth Fund
Diversification can help to reduce volatility over time.
With today’s market volatility, investors should consider evaluating the effectiveness
of a portfolio over a full market cycle. Recent history has demonstrated a diversified portfolio
can perform competitively with an all-stock allocation in the long run.
CUMULATIVE RETURNS: 12/31/99–3/31/22
25/75 Portfolio 80/20 Portfolio S&P 500 Index total return
400%
375%
S&P500
350%
325%
300% 80/20 Portfolio
275%
250%
25/75 Portfolio
225%
200%
175%
150%
125%
100%
75%
50%
25%
0%
-25%
12/99 12/01 12/03 12/05 12/07 12/09 12/11 12/13 12/15 12/17 12/19 12/21 3/22
Note: 25/75 ➟ 25% S&P 500 Index, 75% Bloomberg U.S. Aggregate Bond Index; 80/20 ➟ 80% S&P 500 Index,
20% Bloomberg U.S. Aggregate Bond Index. Past performance is not indicative of future results. Other asset
allocations may have had different returns during those time periods.
All Bloomberg indices are provided by Bloomberg Index Services Limited.
Diversification does not guarantee a profit or ensure against loss. It is possible to lose money in a diversified portfolio.
Dynamic Asset Allocation Growth Fund 3
Performance history as of 3/31/22
Annualized total return (%) comparison
The fund — class A shares Fund’s primary Fund’s secondary Fund’s Lipper peer
before sales charge benchmark benchmark group average
Putnam Dynamic Asset Russell 3000 Index Putnam Growth Mixed-Asset Target
Allocation Growth Fund Blended Allocation Growth
(PAEAX) Benchmark* Funds
18.24
15.40
14.28
12.97
11.92
10.41 10.43 11.25 11.10 10.71
9.68 9.47 9.10
8.01 8.10 8.51
5.55 6.06
4.62
3.51
0.15
LIFE OF FUND† 10 YEARS 5 YEARS 3 YEARS 1 YEAR 6 MONTHS
(since 2/8/94) –0.44 –0.30
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares.
Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the
bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See page 5 and pages 11–12
for additional performance information. For a portion of the periods, the fund had expense limitations, without which
returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
Returns for periods of less than one year are not annualized.
Lipper peer group average is provided by Lipper, a Refinitiv company.
All Bloomberg indices are provided by Bloomberg Index Services Limited.
* Putnam Growth Blended Benchmark is a blended benchmark administered by Putnam Management and comprises
60% the Russell 3000 Index, 15% the MSCI EAFE Index (ND), 15% the Bloomberg U.S. Aggregate Bond Index, 5% the
JPMorgan Developed High Yield Index, and 5% the MSCI Emerging Markets Index (GD).
† The fund’s secondary benchmark, the Putnam Growth Blended Benchmark, was introduced on 12/31/94, which
post-dates the inception of the fund’s class A shares.
4 Dynamic Asset Allocation Growth Fund
Performance history as of 3/31/22
Annualized total return (%) comparison Recent broad market index and fund performance
The fund — class A shares Fund’s primary Fund’s secondary Fund’s Lipper peer U.S. stocks
before sales charge benchmark benchmark group average (S&P 500 Index) 5.92%
Putnam Dynamic Asset Russell 3000 Index Putnam Growth Mixed-Asset Target
Allocation Growth Fund Blended Allocation Growth Fund’s primary benchmark
3.51%
(PAEAX) Benchmark* Funds (Russell 3000 Index)
18.24 Fund’s secondary benchmark
0.15%
(Putnam Growth Blended Benchmark)
15.40
14.28
12.97 Cash
11.92 0.05%
10.41 10.43 11.25 11.10 10.71 (ICE BofA U.S. 3-Month Treasury Bill Index)
9.68 9.47 9.10
8.01 8.10 8.51 Putnam Dynamic Asset Allocation Growth Fund
–0.44%
5.55 6.06 (class A shares before sales charge)
4.62
3.51 U.S. bonds
–5.92%
(Bloomberg U.S. Aggregate Bond Index)
0.15
LIFE OF FUND† 10 YEARS 5 YEARS 3 YEARS 1 YEAR 6 MONTHS
(since 2/8/94) –0.44 –0.30 This comparison shows your fund’s performance in the context of broad market indexes for the six months
ended 3/31/22. See page 4 and pages 11–12 for additional fund performance information. Index descriptions can
be found on pages 17–18.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. All Bloomberg indices are provided by Bloomberg Index Services Limited.
Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the
bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See page 5 and pages 11–12
for additional performance information. For a portion of the periods, the fund had expense limitations, without which
returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
Returns for periods of less than one year are not annualized.
Lipper peer group average is provided by Lipper, a Refinitiv company.
All Bloomberg indices are provided by Bloomberg Index Services Limited.
* Putnam Growth Blended Benchmark is a blended benchmark administered by Putnam Management and comprises
60% the Russell 3000 Index, 15% the MSCI EAFE Index (ND), 15% the Bloomberg U.S. Aggregate Bond Index, 5% the
JPMorgan Developed High Yield Index, and 5% the MSCI Emerging Markets Index (GD).
† The fund’s secondary benchmark, the Putnam Growth Blended Benchmark, was introduced on 12/31/94, which
post-dates the inception of the fund’s class A shares.
Dynamic Asset Allocation Growth Fund 5
Interview with your fund’s portfolio manager
Interview with your fund’s portfolio manager
Brett Goldstein discusses the investing
environment and fund results for the six-month
period ended March 31, 2022, as well as his
outlook for financial markets.
How were investing conditions for the
six‑month reporting period ended
March 31, 2022?
Overall, the investing environment was chal-
lenging for both stock and bond markets. At the
start of the period, broad economic reopenings
Brett S. Goldstein, CFA
caused a surge in global demand. Supply chain
Portfolio Manager
bottlenecks and a global shortage in parts,
Brett is Co-Chief Investment Officer, materials, and labor ensued. U.S. inflation rose
Global Asset Allocation. He has an M.P.S. and energy prices surged. The U.S. Federal
in Statistics, a B.S. in Finance, and a B.S. Reserve turned hawkish and began tightening
in Biometry and Statistics from Cornell
monetary policy. In November 2021, the Fed
University. Brett has been in the investment
started to taper its $120 billion-per-month
industry since he joined Putnam in 2010.
bond-buying program and signaled it would
Adrian H. Chan, CFA, James A. Fetch,
raise interest rates in 2022. The anticipation of
and Robert J. Schoen are also Portfolio
Managers of the fund. rising interest rates curbed investors’ appetite
for stocks.
The pandemic also contributed to uncertainty.
In early December, the global spread of a new
Covid-19 variant, Omicron, caused many
countries to reinstate lockdowns. Investors
grew concerned over the potential disrup-
tions to global economic growth and public
health. Fortunately, the Omicron outbreak
was less severe than anticipated, and most
countries eased their mobility restrictions by
February 2022.
6 Dynamic Asset Allocation Growth Fund
Portfolio composition
U.S. large-cap equity 51.8%
International equity 16.5
U.S. investment-grade bonds 13.7
U.S. small- and mid-cap equity 7.6
U.S. high-yield bonds 4.6
Emerging market equity 4.3
Commodities 1.5
Allocations are shown as a percentage of the fund’s net assets as of 3/31/22. Cash and net other assets, if any,
represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the
portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to
the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different
classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.
Top 10 holdings
HOLDING (PERCENTAGE OF FUND’S NET ASSETS) SECURITY TYPE SECTOR/INDUSTRY
Apple, Inc. (3.3%) Common stocks Technology/Computers
Microsoft Corp. (3.0%) Common stocks Technology/Software
Amazon.com, Inc. (1.9%) Common stocks Consumer cyclicals/Retail
Alphabet, Inc. Class A (1.4%) Common stocks Technology/Technology services
NVIDIA Corp. (1.2%) Common stocks Technology/Electronics
Tesla, Inc. (0.9%) Common stocks Consumer cyclicals/Automotive
JPMorgan Chase & Co. (0.9%) Common stocks Financials/Banking
Walmart, Inc. (0.8%) Common stocks Consumer cyclicals/Retail
Accenture PLC (0.8%) Common stocks Technology/Technology services
Merck & Co., Inc. (0.7%) Common stocks Health care/Pharmaceuticals
This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented
as of 3/31/22. Short-term investments, to-be-announced (TBA) commitments, and derivatives, if any, are excluded.
Holdings may vary over time.
Dynamic Asset Allocation Growth Fund 7
Overseas, long-standing tensions in Europe Stocks are facing major
culminated in Russia’s invasion of Ukraine
headwinds, including a slowdown
on February 24, 2022. Many governments,
in earnings growth, higher
including those in the U.S. and Europe, imposed
sanctions on Russia, which drove up the price of interest rates, and ongoing
oil, wheat, metals, and other global commod- geopolitical turmoil in Ukraine.
ities. The U.S. dollar strengthened as investors
Brett Goldstein
began to favor safer-haven assets, including U.S.
Treasuries. At its mid-March meeting, the Fed
announced its first interest-rate hike since 2018, tactical allocation mix several times over the
adding 0.25% to borrowing costs. The Fed also period. The largest boost to fund performance
lowered its U.S. growth estimates and increased came from our equity allocation decisions.
its inflation outlook for calendar 2022. These added value in the first quarter of
calendar 2022, when the portfolio benefited
For the six-month reporting period, U.S. stocks
from short-term overweight and under-
returned 5.92%, as measured by the S&P 500
weight positions that took advantage of stock
Index. Non-U.S. stocks in developed markets,
market volatility.
as measured by the MSCI EAFE Index [ND], fared
worse, returning –3.38%. Emerging market stocks, In fixed income, the portfolio benefited from a
as measured by the MSCI Emerging Markets Index modest underweight position in interest-rate
[GD], were among the weakest stock performers, risk, as yields rose sharply with the Fed’s move
returning –8.08% for the period. toward tighter policy. We changed the position
to neutral at the beginning of February 2022.
The U.S. 10-year Treasury yield, which helps set
Our positions in credit risk remained close to
borrowing rates from mortgages to corporate
the portfolio’s custom benchmark and did not
debt, began the period at 1.48% and closed
have a significant impact on fund results.
the six-month reporting period at 2.32%.
Higher interest rates, coupled with geopolit- An out-of-benchmark, modest long position to
ical tensions, weighed on the corporate credit commodity risk, implemented at the beginning
market. High-yield bonds returned –3.47%, as of March 2022, was slightly additive to results.
measured by the JPMorgan Developed High We anticipated that the war in Ukraine and the
Yield Index. Investment-grade bonds returned continued reduction in Covid restrictions would
–5.92%, as measured by the Bloomberg U.S. provide support for commodities.
Aggregate Bond Index.
Our active implementation decisions detracted
from performance during the period. Our funda-
How did the fund perform for the
mental U.S. large-cap growth, emerging market
reporting period?
equity, and international developed equity
The fund’s class A shares returned –0.44%, strategies weighed on results. Strategic global
underperforming its primary benchmark, the macroeconomic trades in equities and curren-
Russell 3000 Index, which returned 3.51% for cies contributed to modest losses. The portfolio
the period. The fund also underperformed its experienced slight gains from our quantitative
secondary custom benchmark, the Putnam U.S. large-cap core and international developed
Growth Blended Benchmark, which returned equity strategies. Our fundamental U.S.
0.15% for the period. large-cap value strategy also ended the period
slightly positive.
What strategies affected fund performance
relative to the custom benchmark during the How did the fund use derivatives during
reporting period? the period?
Dynamic asset allocation decisions lifted We purchased and wrote options to help hedge
performance, as we adjusted the portfolio’s duration and convexity, isolate and hedge
8 Dynamic Asset Allocation Growth Fund