Putnam American Government Income APAGVX

Morningstar Rating

Fund Research and Analysis

by Eric Jacobson

We can argue whether Putnam American Government Income is the right fund, but its management definitely did the right thing.

That's evident from returns as of Sept. 15, 2009. The fund soared more than 17% for the year to that point, besting nearly all in the intermediate-government category and pushing its long-term returns near the category's top, as well. Read more

Kudos

Fund bet big on the valuations of certain mortgage derivatives in 2008 and 2009 and ultimately earned a big payoff, driving up its long-term returns. Read more

Risks

A history of choppy returns.

The fund uses leverage and numerous kinds of derivatives that amp up its risk profile.

Despite a reduction in August 2008, expenses are still significant for a government offering. Read more

Strategy

Management stashes roughly half of the fund's assets in mortgage securities--including exotica such as interest-only and principal-only tranches--and half in Treasury and agency bonds. It makes slight adjustments to this mix, as well as modest duration bets, but it isn't looking to take a lot of risk here. Read more

Management

Rob Bloemker, Putnam's head of fixed income, has been a manager here since 2002. He's joined by Daniel Choquette and Michael Salm. They also team up on the fund's mortgage-oriented sibling, Putnam U.S. Government Income, and contribute to Putnam Income PINCX. Read more

Inside Scoop

This fund is diversified across multiple sectors of the government-bond market, but while its long-term returns now look great, they've been choppy. Read more

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