PUTNAM SAYS IT’S ADDING BY SUBTRACTING

Putnam Investments’ dismissal last week of eight fixed-income portfolio managers is part of an ambitious strategy to reshape its bond group and bolster the performance — and menu — of funds that invest in a variety of bonds.

“It ensures that all of the teams are integrated as opposed to being separate,” says Tim Ferguson, a senior managing director who heads the investment operation. “That enables us to better make decisions as to what goes into the (multisector fund) portfolios.”

Under the new arrangement, there are two fixed-income groups: one for municipal bonds, the other for “core” products. A junk-bond unit was folded into the core group.

Edward H. D’Alelio, who headed the junk group, will serve as chief investment officer of the core group. Jerome Jacobs will continue to oversee the tax-exempt group. The restructuring reduces the bond fund department from 127 to 119 people.

Its 81 funds account for $76 billion of the $264 billion in mutual fund assets run by the nation’s fifth-largest manager of such assets. Its average bond fund returned 8.90% in the 12 months ended Feb. 28, compared to 8.60% at other fund groups, according to CDA Wiesenberger, a fund tracking firm in Rockville, Md. Putnam’s 10 multisector funds returned 8.91% during the same time period, significantly below the 9.86% returned by their peer group.

“Our overall performance has not been at the levels we’ve come to expect,” Mr. Ferguson says.

In a market where stocks — not bonds — are in demand, Putnam hopes to lure more investors into fixed-income vehicles by introducing more multisector funds. Such funds offer higher returns because they invest in all types of bonds, ranging from junk to investment-grade corporate securities.

“Bonds are a real tough sell these days,” says Daniel L. Phelps, senior analyst at CDA Wiesenberger. “With a multisector fund you’ve got a little more flexibility to maximize gains.”