Let me illustrate, using hypotheticals, the case for some of the products and strategies we believe should be integrated into future workplace plan design. We looked at how a $100,000 portfolio would have fared over the decade ending with 2008, had it been invested in either the S&P 500 or in an absolute return strategy that actually hit its target of outpacing Treasury bills by 5% a year. As you know, equities rose and fell, and then rose and fell hard again, leaving a net loss of roughly 13% over this time frame.
In contrast, an absolute return strategy aiming to beat Treasuries by 5% a year might have scored gains of over 63% — hypothetically — had it succeeded in reaching its goal, producing nearly twice the final portfolio returns delivered by the S&P strategy!
Let me stress again that this is a hypothetical example, not an actual fund. But after the experience of the past decade in equities, I would suggest that strategies that have even the possibility of earning positive returns in down markets are going to be in strong demand.
Excerpted from a speech given by Robert L. Reynolds President and CEO Putnam Investments, at the 401KWire.Com Influencers’ Summit 2009: DC-IO Partnership Washington, DC May 6, 2009. The full speech is embedded below.
