PABAX
Putnam Dynamic AssetAlloc Balanced-A
Balanced Approach to Asset Allocation
The Putnam Dynamic AssetAlloc Balanced-A (PABAX) fund is designed to provide investors with a balanced approach to asset allocation, aiming for total return through a diversified portfolio of both equity and fixed income investments. This fund is part of the Franklin Templeton Investments family and is categorized under balanced funds, which typically appeal to investors seeking a mix of growth and income. With an asset allocation strategy that includes 50.16% in U.S. equities and 41.95% in bonds, PABAX offers a well-rounded investment option for those looking to balance risk and reward. The fund’s objective is to capitalize on market opportunities while maintaining a level of stability through its fixed income holdings.
At A Glance
Executive Summary
PABAX offers a balanced approach with a 0.96% expense ratio, focusing on both equity and fixed income for total return. Strong tech sector presence.
Diversified exposure to equities and bonds Strong technology sector allocation Competitive yield of 1.70%
Higher expense ratio compared to peers Negative alpha and Sharpe ratio Recent max drawdown of -4.7%
Sector Allocation Highlights
PABAX’s sector allocation is notably skewed towards technology, which comprises 26.43% of the portfolio. This significant allocation reflects the fund’s strategy to leverage growth opportunities within the tech sector, which has been a major driver of market performance in recent years. Other sectors with substantial representation include financials at 13.63% and healthcare at 12.30%, providing a diversified exposure across various economic segments. The fund’s allocation to defensive sectors such as utilities and real estate is relatively modest, indicating a focus on sectors with higher growth potential. This sector strategy aligns with the fund’s balanced approach, aiming to capture upside potential while managing risk.
Performance Metrics and Risk Analysis
The performance of PABAX over the past year has been impressive, with a one-year return of 26.55%, although it trails the benchmark S&P 500 Total Return Index, which posted a 37.62% return. The fund’s risk metrics reveal a beta of 0.64, indicating lower volatility compared to the market. However, the negative alpha of -11.12% and Sharpe ratio of -1.35 suggest that the fund has underperformed on a risk-adjusted basis. The standard deviation of 2.38% reflects moderate volatility, while the Treynor ratio of -17.34 highlights challenges in achieving returns relative to risk. These metrics suggest that while PABAX offers a balanced approach, investors should be mindful of its risk-adjusted performance.
Competitive Expense Ratio and Yield
PABAX features an expense ratio of 0.96%, which is competitive within the balanced fund category, though slightly higher than some peers like Fidelity Adv Balanced-A\Disc (FABLX) with an expense ratio of 0.79%. The fund offers a yield of 1.70%, providing a steady income stream for investors. This yield is attractive compared to similar funds, such as George Putnam Balanced-A (PGEOX) with a yield of 1.20%. The combination of a reasonable expense ratio and a competitive yield makes PABAX an appealing choice for investors seeking income alongside capital appreciation. However, potential investors should weigh these benefits against the fund’s recent performance metrics.
Top Holdings and Portfolio Composition
The top holdings of PABAX include a mix of government securities and leading technology companies. Notable positions include the 2 Year Treasury Note Future and 5 Year Treasury Note Future, each comprising over 4% of the portfolio, reflecting a strong commitment to fixed income stability. On the equity side, major holdings include tech giants like Apple Inc. (3.95%), Microsoft Corp. (3.59%), and NVIDIA Corp. (3.44%), underscoring the fund’s focus on high-growth technology stocks. This blend of fixed income and equity holdings is designed to provide both stability and growth potential, aligning with the fund’s balanced investment strategy.
Max Drawdown and Recovery Analysis
PABAX experienced a maximum drawdown of -4.7% recently, with a drawdown length of one month and no recovery period as of yet. This drawdown occurred between July 16, 2024, and August 5, 2024, highlighting a period of market volatility that impacted the fund’s performance. Despite this setback, the fund’s diversified portfolio and balanced approach are designed to mitigate such risks over the long term. Investors should consider the fund’s ability to recover from drawdowns and its overall resilience in volatile markets when evaluating its suitability for their investment goals.
Comparison with Similar Funds
When compared to similar funds, PABAX holds its ground with a strong one-year return of 26.55%, although it slightly underperforms George Putnam Balanced-A (PGEOX) and VALIC Company I Asset Allocation (VCAAX), which have returns of 26.93% and 26.37%, respectively. The fund’s expense ratio of 0.96% is higher than some peers, such as VALIC Company I Asset Allocation with an expense ratio of 0.65%. However, PABAX’s yield of 1.70% is competitive, offering a higher income potential than several of its counterparts. These comparisons highlight PABAX’s strengths in yield and balanced exposure, though investors should consider the trade-offs in expense and performance.
Conclusion: Suitability for Balanced Investors
PABAX stands out as a balanced fund offering a mix of equity and fixed income investments, making it suitable for investors seeking both growth and income. Its strong allocation to technology and financial sectors provides exposure to high-growth areas, while its fixed income holdings offer stability. Despite some challenges in risk-adjusted performance and recent drawdowns, the fund’s competitive yield and diversified portfolio make it an attractive option for moderate-risk investors. Those looking for a balanced approach with a focus on total return may find PABAX to be a fitting addition to their investment portfolio.
Similar Securities
SCGRX: Franklin Multi-Asset Moderate Growth-A | Balanced Aggressive Growth Fund
SCGRX offers a balanced aggressive strategy with a focus on large-cap funds, providing diversified growth potential with a 1.12% expense ratio.
PGEOX: George Putnam Balanced-A | Balanced Growth and Income Fund
PGEOX offers a balanced approach with a 1.20% yield and a focus on technology stocks, suitable for moderate-risk investors.
BAAPX: BlackRock 80/20 Target Allocation-A | Aggressive Growth Fund
BAAPX offers aggressive growth with a 0.65% expense ratio, focusing on equity securities for high-risk investors.
GAIEX: American Funds Growth and Income-F2 | Balanced Aggressive Growth and Income
GAIEX offers a balanced aggressive strategy with a 1.98% yield and a competitive 0.45% expense ratio, focusing on growth and income.
BDHAX: BlackRock Dynamic High Income-InvA | Balanced Growth and Income Fund
BDHAX offers a high yield of 6.72% with a balanced approach, investing in both equities and fixed income, ideal for income-focused investors.
Futher Reading
https://www.morningstar.com/funds/xnas/PABAX/quote
https://finance.yahoo.com/quote/PABAX/”>Yahoo: Putnam Dynamic AssetAlloc Balanced-A
https://ftcloud.fasttrack.net/web/chart/PABAX
Disclaimer: The information provided on this website is for informational purposes only and should not be construed as financial, investment, or other professional advice. PeepFinance does not endorse or recommend any specific securities, investments, or strategies. The opinions expressed are solely those of the authors and are not intended to be used as the basis for any investment decisions. All investments carry risks, and readers are encouraged to conduct their own research or consult with a financial professional before making any financial decisions. PeepFinance and its authors are not responsible for any losses or damages arising from the use of this information.