Active Income

Short Duration Bond Fund (Class Y)  (PARYX)

Pursuing income with a multi-sector, lower-duration approach

Short Duration Bond Fund received an  Overall Morningstar Rating  of  

Highlights

Objective

The fund seeks as high a rate of current income as we believe is consistent with preservation of capital.

Strategy and process

  • Sector diversification The fund invests in a diversified portfolio of fixed income securities, including corporate debt, bank loans, sovereign debt, and securitized assets, such as mortgage-backed and asset-backed securities.
  • Managing rate sensitivity The fund invests in short-term bonds and other securities, and generally maintains an effective duration, or interest-rate sensitivity, of three years or less.
  • Fundamental approach The fund's experienced portfolio managers implement active strategies that consider several factors, including credit, interest-rate, and prepayment risks, and general market conditions.

Fund price and assets

Prior close 52-week high 52-week low Net assets and outstanding shares
Net asset value $9.55
0.21% | $0.02
$10.17
12/01/21
$9.40
10/20/22
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Net assets and outstanding shares

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Fund facts as of 10/31/22

Total net assets
$1,758.39M
Turnover (fiscal year end)
24%
Dividend frequency (view rate)
Monthly
Number of holdings
480
Fiscal year-end
October
CUSIP / Fund code
746764380 / 1863
Inception date
12/23/08
Category
Taxable Income
Open to new investors
Ticker
PARYX

Management team

Head of Portfolio Construction
Portfolio Manager
Head of Short Term Liquid Markets
Co-Head of Structured Credit
Portfolio Manager, Analyst

Literature


Expect a pause, not a pivot, as savings fuel spending
In the coming months, the Fed will not likely pivot, but pause and wait with a high level of rates for convincing signs of disinflation.
As inflation takes root, fixed income opportunities change
Fixed income markets experienced widespread declines in the U.S. and globally in the third quarter of 2022, as inflation remained high and became more broad-based.
High job openings signal wage-price spiral
Limited labor supply, higher wages, and a high staff turnover seems to have initiated a wage-price spiral.

Performance

Consistency of positive performance over five years

Performance represents 5-year returns in rolling quarter-end periods since inception.

Performance shown above does not reflect the effects of any sales charges. Note that returns of 0.00% are counted as positive periods. For complete fund performance, please see below.

3.54%

Best 5-year annualized return

(for period ending 03/31/21)


0.42%

Worst 5-year annualized return

(for period ending 03/31/16)


1.89%

Average 5-year annualized return


  • Total return (%) as of 09/30/22

  • Annual performance as of 09/30/22

Annualized Total return (%) as of 09/30/22

Annualized performance 1 yr. 3 yrs. 5 yrs. 10 yrs.
Before sales charge -5.67% -0.24% 1.21% 1.49%
After sales charge N/A N/A N/A N/A
ICE BofA 1-3 Year U.S. Corporate Index -5.89%-0.19%1.09%1.43%
Putnam Short Duration Bond Linked Benchmark -5.89%-0.19%1.25%0.75%

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 "before sales charge" performance does not reflect the current maximum sales charges, which we explain below. If performance did reflect the charges, it would be lower. The "after sales charge" performance (or returns at public offering price) varies by share class and fund. For class A and class M shares, the current maximum initial sales charges are 5.75% and 3.50% for equity funds and 4.00% and 3.25% for income funds, respectively (with these exceptions: 2.25% for class A of Putnam Floating Rate Income Fund, Short-Term Municipal Income, Short Duration Bond Fund, Strategic Intermediate Municipal Fund, and Fixed Income Absolute Return Fund). Class B share performance reflects the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, and Putnam Fixed Income Absolute Return Fund; for these funds, the CDSC is 1% in the first year, declines to 0.5% in the second year, and is eliminated thereafter). Class C share performance reflects a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, N, R, and Y shares prior to their inception is derived from the historical performance of class A shares by adjusting for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (note, for two funds — Putnam Tax-Free High Yield Fund and Putnam Strategic Intermediate Municipal Fund performance prior to inception is based on the historical performance of class B shares). Performance for class A, C, R6, and Y shares of Putnam Mortgage Opportunities Fund before their inception is derived from the historical performance of class I shares, which has been adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares. The "after sales charge" performance (at public offering price) for class N shares reflects the current maximum initial sales charge of 1.50%. Class R, R3, R4, R5, and R6 shares, which are available to qualified employee-benefit plans only, are sold without an initial sales charge and have no CDSC. Class Y shares are generally only available for corporate and institutional clients and have no initial sales charge. Performance for class R3 and R4 shares prior to their inception is derived from the historical performance of class Y shares by adjusting for the higher operating expenses for such shares. Performance for class R5 shares before their inception is derived from the historical performance of class Y shares, which has not been adjusted for the lower expenses; had it been adjusted, performance would be higher (with the exception of the RetirementReady Maturity, 2025, 2030, 2035, and 2040 Funds, for which performance is derived from the historical performance of class R6 shares and has been adjusted for the higher operating expenses for such shares; and the RetirementReady 2045, 2050, 2055, and 2060 Funds, for which performance is derived from the historical performance of class R6 shares and has not been adjusted for the lower expenses; had it been adjusted, performance would be higher). Performance for class R6 shares before their inception is derived from the historical performance of class Y shares, which has not been adjusted for the lower operating expenses; had it been adjusted, performance would be higher. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses. Had these limits not been in place, performance would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 11/30/22 1.19% -
YTD as of 12/01/22 or prior close -4.02% -

Yield

Distribution rate before sales charge
as of 12/01/22
2.77%
Distribution rate after sales charge
as of 12/01/22
2.77%
30-day SEC yield as of 11/30/22 4.78%

Risk-adjusted performance as of 09/30/22

Sharpe ratio (3 yrs.) -0.23
Information ratio (3 yrs.) -0.05

Volatility as of 09/30/22

Standard deviation (3 yrs.) 3.26%
Beta 1.08
R-squared 0.93

Fixed income statistics as of 09/30/22

Average effective duration 1.77 yrs.

Lipper rankings as of 09/30/22

Time period Rank/Funds in category Percentile ranking
1 yr. 144/369 39%
3 yrs. 129/345 38%
5 yrs. 39/309 13%
10 yrs. 23/213 11%
Lipper category: Short Investment Grade Debt Funds

Morningstar Ratings as of 09/30/22

Time period Funds in category Morningstar Rating
Overall 544
3 yrs. 544
5 yrs. 481
10 yrs. 338
Morningstar category: Short-Term Bond

Distributions

Accrual days 30
Accrual start date 11/01/22
Accrual end date 11/30/22
Payable date 11/30/22
Income $0.02185938
Extra taxable income --
Short-term cap. gain $0.004
Long-term cap. gain $0.008
Dividend frequency Monthly

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Past performance is not indicative of future results.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.


Holdings

Bank Of America Corp 04.4500 03/03/2026 1.71%
Bank Of America Corporation 04.2000 08/26/2024 1.18%
Banco Santander Usd 01.7220 09/14/2027 1.03%
Jpmorgan Chase 03.8750 09/10/2024 0.98%
Stacr 2018-Hrp2 M3 05.4840 02/25/2047 0.78%
Bpce P/P 144a 01.0000 01/20/2026 0.75%
Goldman Sachs Group 01.9480 10/21/2027 0.72%
Ing Bank N.V. P/P 144a 05.8000 09/25/2023 0.71%
General Motors FINL 01.5000 06/10/2026 0.71%
Siemens Finan P/P 144a 00.6500 03/11/2024 0.66%
Top 10 holdings, percent of portfolio 9.21%



Fixed income statistics as of 09/30/22

Average effective maturity 2.18 yrs.
Average effective duration 1.77 yrs.
Average yield to maturity 5.35%
Average coupon 2.69%

Sector weightings as of 09/30/22

  Cash investments Non-cash investments Total portfolio
  Weight Spread duration Weight Spread duration Weight Spread duration
Investment-grade corporate bonds 57.75% 1.44 0.00% 0.00 57.75% 1.44
Commercial MBS 11.08% 0.13 0.00% 0.00 11.08% 0.13
Residential MBS (non-agency) 7.65% 0.13 0.00% 0.00 7.65% 0.13
Collateralized loan obligations 2.76% 0.09 0.00% 0.00 2.76% 0.09
High-yield corporate bonds 2.54% 0.08 0.00% 0.00 2.54% 0.08
Asset-backed securities (ABS) 1.66% 0.03 0.00% 0.00 1.66% 0.03
Agency CMO 0.01% 0.00 0.00% 0.00 0.01% 0.00
Interest rate swaps 0.00% 0.00 0.00% 0.04 0.00% 0.04
Net cash 16.55% 0.01 0.00% 0.00 16.55% 0.01

Spread duration is displayed in years and reflects the contribution by sector to the portfolio's total spread duration with the exception of the Treasury and Interest-rate swap sectors where effective duration is displayed. Spread duration estimates the price sensitivity of a specific sector or asset class to a 100 basis-point movement, 1%, (either widening or narrowing) in its yield spread relative to Treasuries. Effective duration provides a measure of a portfolio's interest-rate sensitivity. The longer a portfolio's duration, the more sensitive the portfolio is to shifts in the interest rates. Allocations may not total 100% of net assets because the table includes the notional value of derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities.

Maturity detail as of 09/30/22

0 - 1 yr. 31.48%
1 - 5 yrs. 63.90%
5 - 10 yrs. 4.62%

Quality rating as of 09/30/22

AAA 9.70%
AA 8.15%
A 24.11%
BBB 34.07%
BB 2.91%
B 0.18%
CCC and Below 0.22%
Not Rated 4.11%
Net cash 16.55%

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: Allocation of assets among fixed income strategies and sectors may hurt performance. The effects of inflation may erode the value of your investment over time. 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.

Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk, which means that they may increase in value less when interest rates decline and decline in value more when interest rates rise.

The fund may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields. The fund’s exposure to mortgage-backed securities may make the fund’s net asset value more susceptible to economic, market, political, and other developments affecting the housing or real estate markets and the servicing of mortgage loans secured by real estate parties. International investing involves currency, economic, and political risks. Emerging market securities have illiquidity and volatility risks. The fund may not achieve its goal, and it is not intended to be a complete investment program. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.

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.

Credit qualities are shown as a percentage of the fund's net assets. A bond rated BBB or higher is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Ratings and portfolio credit quality will vary over time. Net cash represent the market value weights of cash, derivatives, and short-term securities in the portfolio. The fund itself has not been rated by an independent rating agency.

Country allocation as of 09/30/22

United States 82.35%
Cayman Islands 2.85%
Canada 2.60%
Netherlands 2.16%
Germany 1.92%
France 1.89%
Ireland 1.18%
Spain 1.03%
Switzerland 0.71%
 
Other
3.31%
Bermuda 0.61%
United Kingdom 0.54%
Denmark 0.46%
South Korea 0.41%
Italy 0.38%
Australia 0.32%
Norway 0.31%
Luxembourg 0.23%
Jersey 0.05%

Expenses

Expense ratio

Class A Class B Class C Class R Class R6 Class Y
Total expense ratio 0.62% 0.82% 1.37% 0.87% 0.37% 0.37%
What you pay 0.62% 0.82% 1.37% 0.87% 0.37% 0.37%

Sales charge

Investment Breakpoint Class A Class B Class C Class R Class R6 Class Y
$0-$49,999 2.25% 0.00% 0.00% -- -- --
$50,000-$99,999 2.25% 0.00% 0.00% -- -- --
$100,000-$249,999 1.25% -- 0.00% -- -- --
$250,000-$499,999 0.00% -- -- -- -- --
$500,000-$999,999 0.00% -- -- -- -- --
$1M-$4M 0.00% -- -- -- -- --
$4M-$50M 0.00% -- -- -- -- --
$50M+ 0.00% -- -- -- -- --

CDSC

  Class A (sales for $250,000+) Class B Class C Class R Class R6 Class Y
0 to 9 mts. 0.75% 1.00% 1.00% -- -- --
9 to 12 mts. 0.00% 1.00% 1.00% -- -- --
2 yrs. -- 0.50% 0.00% -- -- --
3 yrs. -- -- 0.00% -- -- --
4 yrs. -- -- 0.00% -- -- --
5 yrs. -- -- 0.00% -- -- --
6 yrs. -- -- 0.00% -- -- --
7+ yrs. -- -- 0.00% -- -- --

The ICE BofA 1-3 Year U.S. Corporate Index is an unmanaged index U.S. investment-grade corporate debt with a remaining term to maturity of less than 3 years. The ICE BofA U.S. Treasury Bill Index is an unmanaged index that tracks the performance of U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market. Qualifying securities must have a remaining term of at least one month to final maturity and a minimum amount outstanding of $1 billion. The Putnam Short Duration Bond Linked Benchmark represents the performance of the ICE BofA U.S. Treasury Bill Index through May 31, 2018, and the performance of the ICE BofA 1-3 Year U.S. Corporate Index thereafter. You cannot invest directly in an index.

Each fund seeks to earn a positive total return that exceeds the rate of inflation by a targeted amount over a reasonable period of time regardless of market conditions. There can be no assurance that a fund will meet its objective. The fund is not intended to outperform stocks and bonds during strong market rallies. Consult your financial advisor to determine which fund fits into your investment goals and time horizon.

Consider these risks before investing: Allocation of assets among fixed income strategies and sectors may hurt performance. The effects of inflation may erode the value of your investment over time. 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.

Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk, which means that they may increase in value less when interest rates decline and decline in value more when interest rates rise.

The fund may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields. The fund’s exposure to mortgage-backed securities may make the fund’s net asset value more susceptible to economic, market, political, and other developments affecting the housing or real estate markets and the servicing of mortgage loans secured by real estate parties. International investing involves currency, economic, and political risks. Emerging market securities have illiquidity and volatility risks. The fund may not achieve its goal, and it is not intended to be a complete investment program. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.

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.

Credit qualities are shown as a percentage of the fund's net assets. A bond rated BBB or higher is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Ratings and portfolio credit quality will vary over time. Net cash represent the market value weights of cash, derivatives, and short-term securities in the portfolio. The fund itself has not been rated by an independent rating agency.