A press release entitled, "Putnam Launches Short Duration Income Fund to Help Address Marketplace Desire for Yield and Capital Preservation," says, "Putnam Investments today announced that it has launched the Putnam Short Duration Income Fund (PSDTX), which seeks to combine some of the most appealing characteristics of both money market funds and ultra-short bond funds, in an effort to meet a growing marketplace demand among both retail and institutional investors. The new Fund will strive for a higher rate of current income than is typical of money market funds and a have a greater focus on capital preservation than is usually associated with ultra short bond funds, with the goal of maintaining liquidity." Putnam's offering joins recent launches by JP Morgan, Fidelity, and Oppenheimer in entering the recently-resurrected "enhanced cash" space.
Robert Reynolds, President & CEO of Putnam Investments, comments, "In today’s environment, investors are demanding higher yields, but at the same time are understandably concerned about market risk. The Putnam Short Duration Income Fund is a unique offering that addresses each of these factors, seeking to generate a high rate of current income, while simultaneously working to preserve capital. It is a far more compelling investment vehicle than today's money market fund, filling a definite need in the market, and we expect that it will continue to be a powerful offering for years to come."
The press release explains, "Like many other types of funds, including money market funds, the Short Duration Income Fund offers a check-writing feature, through which investors may redeem shares by writing checks. This feature provides a convenient supplement to conventional bank checking accounts. In seeking to fulfill its objective, the Putnam Short Duration Income Fund will invest in a diversified portfolio of fixed-income securities composed of short duration, investment-grade money market, and other fixed income securities. Its primary benchmark will be the BofA Merrill Lynch U.S. Treasury Bill Index."
Putnam adds, "Among its more traditional short-term and money-market securities holdings, the Fund will invest in certificates of deposits, commercial paper, time deposits, repurchase agreements and U.S. government securities, including Treasury Bonds and other fixed income instruments. Additionally, the Fund will invest in asset-backed securities, investment-grade corporate bonds, sovereign debt, and will make prudent use of derivatives to help mitigate risk. The fund will make daily accruals and pay distributions monthly."
Reynolds also says, "The Putnam Short Duration Income Fund is an excellent alternative for investors -- individuals and corporations -- who generally want to try to strike a balance between generating greater yields through a broader range of investment grade securities, while focusing on the goal of managing risk and preserving capital."
Finally, the release adds, "The new fund will offer investors the benefits of the intensive fundamental research and proprietary risk management performed by a Putnam fixed-income team whose members have extensive expertise in money market securities and other short-term investments. It will be managed by a team of veteran Putnam portfolio managers, led by Michael V. Salm, Co-Head of Fixed-Income."
While the space has not attracted serious dollars to date, these vehicles, which tend to yield from 20 to 50 basis points, remain poised to benefit should money funds be further hampered by future regulatory changes. For more on recent entrants just beyond money funds, see our previous Crane Data News updates on the "enhanced cash" or "money fund plus" market: "JPMorgan Rolls Out Ultra-Short Money Mkt Fund, Enhanced Cash Fund" (10/1/10), "Fidelity Launches Conservative Income Bond Fund; New Enhanced Cash" (3/14/11), "Oppenheimer Short Duration Fund Launches; Dreyfus Closes Enhanced" (4/26/11), and "Guggenheim Launches Enhanced Ultra-Short Bond ETF, Latest Cash+" (6/3/11).
