Putnam funds to lower fees, provide better disclosure

Firm seeks to restore reputation after abuses

January 28, 2004|By THE BOSTON GLOBE

Looking to repair its damaged reputation, Putnam Investments said yesterday that it would cut the fees it charges investors and disclose more information about how portfolio managers are paid.

The initiatives follow tighter internal controls and restrictions on employee trading that Putnam agreed to as part of a settlement with federal regulators of civil securities fraud charges.

They "are all done toward regaining trust and confidence in the Putnam name, and we'll be doing more things until we get it right," said Charles "Ed" Haldeman Jr., who became chief executive Nov. 3 in a shake-up sparked by a trading scandal.

Putnam will disclose how much its 5,000 employees have invested in the company's mutual funds. But Putnam won't disclose portfolio managers' exact holdings in the funds they run.

The issue is sensitive, because frequent trading by six money managers in Putnam funds got the Boston company in trouble. As part of the settlement, Putnam adopted a rule requiring that its investment staff hold onto any Putnam funds they buy for at least one year.

Haldeman said privacy concerns make it difficult to disclose managers' holdings. Moreover, other Putnam employees, such as research analysts, contribute to fund performance, so disclosing just the managers' holdings would not tell the whole story, he said.

Putnam said the information would show its money managers' bonuses are based on three- and five-year returns, to prove long-term performance is more important than one hot year.

Individually, the cost reductions offer modest savings to investors, depending on their portfolios, but collectively would cost Putnam about $35 million a year in lost revenue from its retail mutual fund business. That's still a fraction of Putnam's revenue, which through the first nine months of 2003 totaled $1.4 billion.

Putnam's investors may soon save millions more if the mutual funds' trustees succeed in negotiations over a new contract with the investment management firm for the fiscal year that begins July 1. Trustee Chairman John A. Hill said the trustees want Putnam to charge lower fees as its funds get larger.

For now, though, Putnam said it will cut its portion of the fee that investors pay when they buy a fund by half a percentage point, which would save a buyer $50 on a $10,000 purchase of an equity fund.

Putnam also said it will reveal expenses in dollar terms that shareholders pay annually, based on $1,000 invested, which should allow investors to calculate roughly what they paid in a year.

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