Putnam Investments has unveiled a series of target-date retirement funds comprised solely of the firm’s actively managed ESG-focused ETFs.
Each fund’s asset allocation follows a glidepath, becoming more conservative as its target retirement date approaches.
The Putnam Sustainable Retirement Series includes funds with target retirement dates between 2025 and 2065 in five-year increments, as well as a maturity fund that is designed for investors already in retirement.
Managed by Putnam’s Global Asset Allocation team, each fund’s asset allocation is adjusted annually, becoming more conservative over time according to a predetermined “glidepath”, reflecting the need for reduced investment risk as retirement approaches.
The longest-range fund (Putnam Sustainable Retirement 2065 Fund) currently has an asset mix of approximately 95% equity ETFs and 5% fixed income ETFs, while the shortest-range fund (Putnam Sustainable Retirement 2025 Fund) is currently split approximately 30/70 between stocks and bonds.
The Putnam Sustainable Retirement Maturity Fund, meanwhile, is the most conservative with a 25% allocation to equities and 75% to fixed income.
Commenting on the new offering, Robert L. Reynolds, President and CEO of Putnam Investments, said: “As the retirement marketplace continues to evolve and grow, there is a tremendous appetite for meaningful product innovation that creates a greater choice of offerings to help working Americans achieve their financial goals. Putnam is pleased to continue our commitment to delivering differentiated active management strategies by adding to our line-up of investment products for plan sponsors and their participants.”
The ETFs
Each target-date retirement fund contains a mix of four equity and three fixed income ETFs.
The Putnam Sustainable Leaders ETF (PLDR US) invests in US-listed equities of companies that have demonstrated a commitment to sustainable business practices by, for example, managing resources, reducing waste, limiting carbon intensity, committing to fair labour practices, and promoting corporate transparency and board independence.
The Putnam Sustainable Future ETF (PFUT US) also invests in US equities, selecting companies whose products and services contribute to sustainable environmental and economic development by, for example, reducing carbon emissions, improving water quality, enhancing employee well-being, and promoting equal economic opportunity.
The Putnam PanAgora ESG International Equity ETF (PPIE US) and Putnam PanAgora ESG Emerging Markets Equity ETF (PPEM US), which are sub-advised by Putnam affiliate PanAgora Asset Management, invest in portfolios of developed or emerging market stocks that meet PanAgora’s assessment of ESG criteria. PanAgora’s proprietary ESG framework uses quantitative models to assign each company a score between -2 and +2 with firms required to possess scores greater than zero to be eligible for inclusion.
The three fixed income ETFs, meanwhile, offer access to aggregate, high yield, and ultra-short bond portfolios.
The Putnam ESG Core Bond ETF (PCRB US) invests predominantly in US Treasuries and investment-grade corporate bonds from issuers located in the United States, focusing on debt securities with maturities greater than three years.
The Putnam ESG High Yield ETF (PHYD US) invests predominantly in sub-investment-grade bonds from US-based corporate issuers, also focusing on securities with intermediate duration.
The Putnam ESG Ultra Short ETF (PULT US) invests predominantly in short-duration, investment-grade fixed income securities.
These three bond ETFs are managed by Putnam’s Fixed Income division which screens for issuers that meet relevant ESG criteria on a sector-specific basis. Putnam’s ESG analysis considers board structure and composition, workplace diversity and inclusion, carbon intensity, sources of energy used for operations, water use and re-use, employee safety, supplier audits, and product safety, among other factors. Putnam assigns each company a proprietary ESG rating ranging from 1 to 4 with issuers required to possess a score of either 1 or 2 to be eligible for inclusion.
The current approximate asset allocation of each target-date retirement fund is outlined in the table below:
Source: Putnam Investments.