Farmers reckon with new reality: Im not a climate change guy, but…

Mitch McConnell blocks election security legislation

Pelosi chalks up spat with Ocasio-Cortez to family differences

Frat suspends students who posed with guns at Emmett Till sign

Missing girl highlighted by President Reagan found 34 years later

Behind the dramatic arrest of 16 Marines: Its a shock to the system

Police confirm sightings of teen suspects in highway murders

Armed robbers take off with $40 million worth of gold from airport

Consumer Reports finds hazardous bacteria in pre-washed greens

Did Mueller change his statement on indicting Trump?

Mueller sticks to the script in day of grueling testimony

Robert Mueller undercuts Trumps key claims about special counsels report

Why Mueller didnt charge Trump with obstruction

Legal analyst Jonathan Turley on Mueller testimony

The 10 times Trump may have obstructed justice, according to Mueller

Updated on: June 26, 2009 / 12:44 PM/ MoneyWatch

s new Absolute Return funds, you really have only yourself to blame. Their debut earlier this year was backed by a full court press push: full page color ads, press releases,interviews, and prime real estate on thePutnam website. The four funds — dubbed theAbsolute Return 100 Fund300 Fund500 Fund, and700 Fund– intend to provide something that should be an easy sell in todays markets:Consistent performance with low volatility

. The funds aim to earn returns that outpace Treasury bills by one, three, five and seven percent respectively. Unfortunately, they seem more likely to follow in the footsteps of the vast majority of the mutual fund industrys other innovations.

On the Putnam website, CEORobert Reynoldssays that the Absolute Return funds were created asa bold response to the challenge of historically volatile financial markets,and that these funds are absolutely for all kinds of investors. Thats a nice thought, but what one person calls a bold response might also be considered, a bit more cynically, as an attempt to capitalize on the mood of the day.

The cynics have the benefit of history on their side. As you can see from the accompanying charts (click for full-sized versions), the mutual fund industry is forever fighting the last war. Whether technology funds in 2000 or emerging market and commodity funds in 2008, the industry has demonstrated a tremendous capacity for providing precisely the wrong type of investment at precisely the wrong time. The reason isnt difficult to understand: its far easier to sell something when everyones clamoring for it, which is usually just before hot sectors and styles flame out.

We have yet to see whether the new Putnam funds will fit this historical pattern, but theres no denying their goal fits the mood of the day. The question, of course, is how successful theyll be in achieving absolute returns with low volatility. In that regard, the odds are against them.

Consider the 500 and 700 funds, which are advertised asalternatives to balanced and stock funds, respectively. According to the prospectus, the fund managers will attempt to add value through the use of overlay strategies, which the prospectus defines as active trading strategies designed to provide additional total return through the exploitation of market inefficiencies and other conditions.

Exploiting market inefficiencies. So much for concerns that they wouldnt have a plan. I can only imagine walking intoDavid Swensens office atYaleto pitch my asset-management strategy:

Why didnt I think of that? Can you handle $1 billion?

will undoubtedly be accompanied by a fair amount of trading

, which will increase the funds already considerable expenses. The funds A shares have expense ratios that range from 1.25 percent for the 100 Fund to 1.65 percent for the 700 Fund (net of fee waivers), and are accompanied by front-end sales loads of 3.25 percent (for the 100 and 300 funds) or 5.75 percent (for the 500 and 700 funds).

Thus an investor who holds the 500 Fund for five years might be on the hook for total annual expenses of 3.2 percent (a 1.5 percent expense ratio, plus the annualized sales load of 1.2 percent, plus trading costs conservatively estimated at 0.5 percent). If the Treasury bill return over that period is 2 percent annually, the fund would have to return 10.2 percent annually to meet its goal.

Sounds like a stretch. If only we had some sort of a track record to determine if thats a reasonable expectation.

As luck would have it, we do. Back on page 57, in the appendix of the prospectus, were informed that Putnam manages other accounts that have investment objectives and policies that are substantially similar to those of the Absolute Return 500 Fund. So, how have they fared? Not so hot, actually.

In the year ended September 30, 2008, the other accounts lost 7.8 percent, while the Treasury Bill Index gained three percent. From their July 1, 2006 inception, the other accounts have earned 3.8 percent, compared to the Treasury Indexs gain of 4.2 percent — falling short of their target by 5.4 percent. It is, admittedly, a short time frame, but if youre setting bold targets, you should expect to have your record scrutinized.

To help alleviate concerns about performance, Reynolds points out that they have afee structure that aligns the interests of manager and investor…. If the funds dont achieve the target returns, [Putnam] will be paid less. Now were talking. How much less, exactly?

Well, you might call it a bit less. The maximum adjustment on the 100 Fund is — hold your breath — 0.04 percent. On the 300 Fund, its 0.12 percent; 0.2 percent on the 500 Fund; and 0.28 percent on the 700 Fund. So yes, they do have a bit of skin in the game, but barely enough to require a Band-Aid should they lose it.

In sum, Putman is offering a new suite of funds with high expenses, sales loads and a poor track record at the precise moment in time when they should have the broadest appeal. As my grandfather liked to say about deals like that, Cover your wallet.

© 2009 CBS Interactive Inc.. All Rights Reserved.

View all articles by Nathan Hale on CBS MoneyWatch

Nathan Hale has spent decades working in the financial services industry, during which he has researched and written extensively about personal investing, the mutual fund industry, and financial services. In this role, he uses a nom de plume because many of his opinions about the mutual fund industry and its practices would not endear him to its participants.

When students return to public schools in the state this fall, theyll see a new message on display: In God We Trust

Data from the firm could lower credit ratings for companies and local governments exposed to climate-change risk

Francisco Erwin Galicia said he didnt shower for 23 days and was not provided with enough food while detained

Determining if youre among the 147 million Americans entitled to compensation for 2017 breach takes only seconds

The agreement requires the two companies to divest enough assets to help Dish become new No. 4 player in mobile phones

The agreement requires the two companies to divest enough assets to help Dish become new No. 4 player in mobile phones

The Senate majority leader blocked the bill hours after former special counsel Robert Mueller warned Russians are still interfering in U.S. politics

The House Judiciary chairman spoke about the next steps his committee will take to enforce its subpoena of former White House counsel Don McGahn

The bill aims to prohibit the imposition of the death penalty for any violation of Federal law, and for other purposes

The new film Mike Wallace Is Here shows the legendary newsmans interview with a young Donald Trump

Several other Americans are still believed to be held captive in Syria, including freelance journalist Austin Tice

The suspects, who are still at large, posed as police officers and drove away with two hostages and the valuables

The woman begged and pleaded with the National Guard to let them cross, photographer says

After Trump demands Sweden give A$AP Rocky his FREEDOM, officials stress independence of courts and laws that differ from Americas

Rescue groups say tragedy is stark reminder of humanitarian crisis in Libya and urgent need to resume search and rescue missions

The new film Mike Wallace Is Here shows the legendary newsmans interview with a young Donald Trump

More than 30 years before Donald Trump would run for the White House, legendary 60 Minutes newsman Mike Wallace grilled him about his criticism of Washington politicians and whether he had a future in politics. Watch a clip from the interview as seen in the new documentary, Mike Wallace Is Here.

Get ready to binge-watch the final season of one of Netflixs most-watched original series

Megan Rapinoe is taking on everything from soccer to nationalism to gay rights

Determining if youre among the 147 million Americans entitled to compensation for 2017 breach takes only seconds

The agreement requires the two companies to divest enough assets to help Dish become new No. 4 player in mobile phones

One of the only ways to get Google to permanently remove a link is with a court order, and CBS News has found some companies, and even convicted criminals, trying to game the system with forged documents

Mounting competition from Walmart and other big retailers is forcing the online leader to invest more on delivery

The committee says that though the country was unprepared in 2016 for the Russian attacks on its election infrastructure, the U.S. has learned much more about the nature of Russian cyber meddling and better understands the threat it poses

Data from the firm could lower credit ratings for companies and local governments exposed to climate-change risk

According to her keepers, Trudy was the boss lady

Ive been obsessed with dinosaurs since I was a kid, so it was a pretty big deal, UC Merced student Harrison Duran said

A nuclear power plant in southern France even shut down two reactors due to high temperatures

SpaceX Dragon cargo ship was loaded with 5,000 pounds of equipment and supplies including a container of bright green Nickelodeon slime

Dr. Tara Narula and news anchor Jamie Stelter, who experienced five miscarriages, talk about the invisible loss

Consumer Reports says it tested nearly 284 samples of fresh greens like lettuce, spinach and kale and found six of those samples tainted with listeria

The teenagers were brought to Childrens Hospital of Wisconsin with extreme cough, shortness of breath and fatigue

The Naegleria fowleri amoeba is generally found in warm, fresh water, but cases of human infection are rare

Two teens who testified before the House Committee on Oversight and Reform said a Juul rep visited their schools mental health and addiction seminar

Data from the firm could lower credit ratings for companies and local governments exposed to climate-change risk

Determining if youre among the 147 million Americans entitled to compensation for 2017 breach takes only seconds

The agreement requires the two companies to divest enough assets to help Dish become new No. 4 player in mobile phones

The slowdown in economic growth may increase the likelihood of a rate cut from the Federal Reserve next week

One of the only ways to get Google to permanently remove a link is with a court order, and CBS News has found some companies, and even convicted criminals, trying to game the system with forged documents

The remains of Jonelle Matthews, a 12-year-old girl who disappeared in 1984, have been found by construction workers in Colorado, police said. One of her childhood friends spoke to CBS Denver.

An investigation into Marines accused of helping smuggle migrants into the United States led to the arrest of 16 of their fellow Marines at Californias Camp Pendleton, just north of the U.S.-Mexico border.. CBS News correspondent Jamie Yuccas joined CBSN with the latest.

Authorities said Kam McLeod and Bryer Schmegelsky have been spotted twice in the area where they found their burned out SUV

The father of one of the teenage suspects in an international murder mystery says he believes the manhunt for his son will end with his death. Bryer Schmegelsky and Kam McLeod are accused of killing three people on remote Canadian roads, including an American woman and her Australian boyfriend. Janet Shamlian reports.

Two of the countrys most famous military units are under intense scrutiny. A human smuggling investigation led to the mass arrest of 16 Marines from the 1st Marine Division Thursday at Camp Pendleton in California. Two other Marines were arrested and charged earlier this month. The accusations range from smuggling illegal immigrants into the country to drug-related offenses. Jamie Yuccas reports.

Thursdays launch marks SpaceXs 18th cargo run to the International Space Station. The Dragon supply ship atop the Falcon 9 was making its third trip to the lab complex, this time loaded with 5,000 pounds of crew supplies, equipment and high-tech science gear, including a low-tech container of bright green Nickelodeon slime for educational outreach. Watch the rocket launch here.

SpaceX Dragon cargo ship was loaded with 5,000 pounds of equipment and supplies including a container of bright green Nickelodeon slime

Four days after the first successful moon landing, astronauts Neil Armstrong, Buzz Aldrin and Michael Collins faced a final, harrowing challenge

Kraft virtually invented the mission control concept behind NASAs greatest space triumphs

OneWeb is doing for the satellite industry what Henry Ford did for cars, said FCC Chairman Ajit Pai

A traveling exhibition of gothic and occult art, sideshow performers, and bizarre specimens stopped outside Chicago, where CBS News photographer Jake Barlow took in the odd sights

Americas first major landscaped public park, the 840-acre park in Manhattan welcomes more than 37 million visitors every year

A look at the cult slayings that shocked and scared America

Evidence from the scene of Pace University student DJ Henrys fatal encounter with Officer Aaron Hess in Mount Pleasant, N.Y.

On July 23, 2015, detectives with the Montgomery County Texas Constables Office arrive at the Houston gym owned by Ramon Sosa and his wife, Lulu, to arrest Lulu on suspicion of plotting her husbands death.

Video from Robert Coulombe who attended Pace University with DJ Henry shows the scene at a Westchester, N.Y., strip mall minutes after DJ was shot in his car by Officer Aaron Hess in October 2010.

A wealthy Hollywood producer is accused of murdering his girlfriend. Was he following the plot of his frightening novel? Correspondent Maureen Maher investigates Saturday, July 13 at 10/9c on CBS.

When Olga Kasian did not hear from her daughter Iana after several days, she began repeatedly calling 911. Concerned about Ianas well-being and her recent C-section, Kasian desperately asks police — through the help of an Russian interpreter — to enter the home her daughter shared with boyfriend Blake Leibel.

Close friends of the slain college sophomore share stories about the chef, writer and aspiring doctor who left their lives too soon.

Copyright © 2019 CBS Interactive Inc. All rights reserved.

Market data provided byICE Data ServicesICE Limitations. Powered and implemented byFactSet. News provided by The Associated Press.Legal Statement.