Putnam to merge two bond funds

January 22, 1995|By Bloomberg Business News

BOSTON -- Putnam Investments plans to merge two municipal bond funds in a move that some analysts say is designed to save the firm money.

"It isn't economically attractive to run a muni-bond fund that's less than $50 million in size," said Donald Cassidy, an analyst at Lipper Analytical Services Inc. The fixed costs of running a small muni-bond fund roughly equal the fees that are generated, he said.

Putnam said costs played a part in the decision to merge the $43-million Investment Grade Intermediate Trust with the $7.5-million Intermediate Tax Exempt Fund.

"Costs were considered," said Michael Bouscaren, a portfolio manager in Putnam's muni-bond department. "The deciding factor, though, was that this merger benefits shareholders."

Putnam intends to merge the assets of the Intermediate Trust, whose shares trade on the American Stock Exchange, into the open-end Intermediate Tax Exempt Fund. The two funds being merged invest in intermediate-term tax-exempt bonds issued by municipalities nationwide.

Putnam's plan needs approval from the funds' trustees and shareholders. Meetings are scheduled for Feb. 2-3. If approved, the merger is expected to be completed in the third quarter.

Robert A. Lee, an analyst at PaineWebber Group Inc., said fund mergers are good for shareholders. "In this transaction, people who hold the Putnam closed-end fund today are going to see the value of their investment go up," he said.

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