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A Solid Approach to Value

Putnam Equity Income earns a Fund Analyst Rating of Bronze.


Nicholas Goralka: Putnam Equity Income, which carries a Morningstar Analyst Rating of Bronze, features a capable portfolio manager who has posted strong results. Darren Jaroch has led this strategy since 2012 and contributed to its success dating back to the early 2000s under predecessor Bart Geer. Jaroch runs a relative-value strategy that starts with a five-factor model and depends on Putnam’s analyst bench for fundamental research. Although Jaroch keeps turnover low, at only 16% in 2018, portfolio construction is a quantitative effort--Jaroch attempts to obtain precise levels of exposure to over 30 proprietary risk factors. However, he will occasionally override the model’s allocation in the name of fundamental logic. Since Jaroch became lead PM, the strategy has bested its Russell 1000 Value Index and peers with less volatility; however, returns under Jaroch’s tenure have trailed some dividend-oriented indices such as the S&P 500 Dividend Aristocrats. The strategy’s 12-month yield also trails the Russell 1000 Value Index, so it may not be suitable for investors explicitly looking for equity income. Still, with Jaroch at the helm, the strategy is a strong value option.

Nicholas Goralka does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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