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Rating:Putnam Reorganizes Funds, Assets Reach 10-Year Low Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, May 15, 2006

Putnam Reorganizes Funds, Assets Reach 10-Year Low

by: Neil Anderson, Managing Editor

The mutual fund assets of Putnam Investments have fallen to their lowest level in over ten years, the Financial Times reported Monday. On Friday, the Boston-based fund group announced the proposed merger of its two of its funds, and new management for its largest fund.

According to data released by Financial Research, Putnamís mutual fund assets, excluding money market funds, fell to $99.5 billion at the end of March, after investors withdrew approximately $4 billion in the first quarter of 2006. This drop comes in the wake of outflows in 2005 of $21 billion, higher than those at any of the other large U.S. fund groups.

Putnamís fortunes have failed to turn around since 2003 -- when Putnam paid $190 million to settle charges that its employees had improperly traded shares of their own mutual funds -- but the investment exodus began before the scandal. All told, investors have withdrawn $100 billion from Putnam over the past years, bringing its managed assets down to less than half of their peak total of $240 billion in 1999.

Charles Haldeman who replaced Lawrence Lasser as president and CEO, has overseen fund fee reductions, ad campaigns, layoffs, and the replacement of a majority of the companyís top executives, all in an effort to get Putnam back on its feet.

It's not certain whether recent operational changes are connected to the firm's continuing woes. On Friday,Reuters reported that Putnam has replaced the manager of the Putnam Fund for Growth and Income, Putnamís largest fund offering. Eric Harthun, previously a portfolio member of the Putnam Small Cap Value Fund, and deputy head of investments Joshua Brooks will serve as co-portfolio leaders of the Fund for Growth and Income. Current portfolio leader Hugh Mullin will leave Putnam after ten years as a manager for the fund. He has been the portfolio leader since 2002.

The $15.6 billion fund, which peaked at $32.3 billion in 2000, returned 5.2 percent in 2005, and 6.47 percent so far in 2006.

The trustees of Putnam have also decided to merge two of the firmís funds. Under the proposal, the Putnam Managed High Yield Trust, a closed-end fund with net assets of approximately $67 million, would be merged into the Putnam High Yield Trust, an open-end fund with net assets of $2.41 billion. In a press release, Putnam cited the two fundsí ďsimilar investment objectives and strategiesĒ as the main reason behind the merger.

According to Putnam, the merger would result in lower shareholder expenses for the Putnam Managed High Yield Trust, and should be tax-free. The merger must approved by the shareholders of the Putnam Managed High Yield Trust prior to a special shareholder meeting August 8. If completed, it will bring a 1 to 2 percent redemption fee for those wishing to redeem or exchange their shares. 

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