Putnam’s Reynolds Fights Customer Flight With Six FundsChristopher Condon
Putnam Investments LLC, the asset manager in its fifth year of a turnaround effort by Chief Executive Officer Robert L. Reynolds, introduced six new mutual funds, including two aimed at investors weary of stock swings.
Putnam is backing the products with a marketing campaign designed to persuade investors to diversify their holdings and prepare for more market swings, higher taxes and rising interest rates, the Boston-based company said today in a statement. The other new products are an emerging-markets bond fund, a global dividend-oriented stock fund and two municipal-bond funds.
“Conventional wisdom shaped by decades of high-return investing -- first in equities from 1982 to 2002, then in fixed-income markets over most of this young century -- needs to be re-examined, revised or even scrapped,” Reynolds said last week in a speech to financial advisers in Orlando.
Putnam, one of the oldest U.S. mutual-fund firms, has brought out 26 new funds since Reynolds took over in 2008. The CEO has reorganized the company’s equity division, attracted new talent and won accolades for fund performance in its best years, without being able to stop a decline in assets or make the firm profitable for its parent, Montreal-based Power Corp., owned by Canada’s Desmarais family.
Putnam, with $133 billion in assets as of Feb. 28, hadn’t rolled out a new fund in more than four years when Reynolds joined, according to Jon Goldstein, a spokesman.
“One advantage of working for a family-owned firm is that we can make investments that have a five or ten-year time horizon,” Reynolds said in a March 14 interview. “We’re approximately break-even right now and we feel very confident about the future.”
Fee income for Putnam in 2012 dropped 5.1 percent from the previous year to $731 million, the company reported in fourth-quarter earnings presentations for Great West Lifeco Inc., Power’s insurance unit under which Putnam is organized. Revenue at the top publicly traded U.S. asset managers increased an average of 4.4 percent in 2012, according to a March 14 paper published by consulting firm Casey Quirk in Darien, Connecticut.
Putnam lost $22 million in 2012, excluding financing expenses charged by its parent to recover the original purchase price. Assets rose 10 percent to $128.3 billion, driven by a 13 percent rise in global stocks as measured by the MSCI AC World Index.
The firm had net deposits in 2011 for the first time in a decade. Investors pulled money again in 2012 when net withdrawals totaled $1.79 billion.
The company was No. 1 in Barron’s ranking of U.S. fund families last year and in 2009, based on asset-weighted performance across asset types. The firm ranked at the middle of the pack over the past five years, placing 27th.
The funds opened since Reynolds took over hold a combined $6.1 billion. The Capital Spectrum Fund, which invests in stocks and bonds, has grown to $2.3 billion since starting in May 2009. A lineup of four so-called absolute return funds opened in January 2009, totals $2.8 billion. Absolute return funds use a variety of investment techniques to try to generate profits or limit losses regardless of market conditions.
The firm’s newest funds, including those opening today, are part of a drive to offer retail investors access to investment strategies previously limited to institutions, Reynolds said in the interview.
The Putnam Low Volatility Equity Fund will seek returns matching the U.S. equity market, with reduced price swings. A second, the Strategic Volatility Equity Fund, will target above-average returns, with volatility comparable to the market.
Fund companies have been adding products designed to offer lower volatility since the financial crisis that caused the 2008 stock plunge. Denver-based Janus Capital Group Inc. opened its Diversified Alternatives Fund in December. Invesco Ltd. started its $3.5 billion Powershares S&P 500 Low Volatility Portfolio, an exchange-traded fund, in May 2011.
Both of Putnam’s new volatility-themed funds will focus on stocks with low correlation to the aggregate U.S. equity market, a strategy that historically comes with tempered risk, said Robert J. Schoen, who will manage the portfolios. Schoen will use call and put options to protect against significant losses. Calls and puts give investors the right, respectively, to buy and sell securities in the future at an agreed price.
Reynolds, 61, began his fund career at Boston-based Fidelity Investments in 1984, and was once considered a possible successor to Fidelity Chairman and CEO Edward “Ned” Johnson III before leaving that company in April 2007.
He took over Putnam four years after the company paid $110 million to settle claims by the U.S. Securities and Exchange Commission and Massachusetts regulators that it allowed improper trading by some money managers and favored investors that may have hurt other mutual-fund customers.
The scandal and poor performance reduced assets to about $166 billion by the time Reynolds joined from a peak of $420 billion in 2000. Power acquired Putnam in 2007 from Marsh & McLennan Cos. for $3.9 billion.