Putnam shakes up lagging equity division

In a bid to boost its lagging fund performance, Putnam Investments of Boston announced today that they are merging six equity funds, moving away from team management and firing 12 portfolio managers.

Additionally, 35 staff positions have been eliminated firmwide, including some in the quantitative research team.

All of the jobs cut are from the investment group.

Putnam is also instituting a pay-for-performance program for its managers.

“On the equity side of the business, we were not holding our own and some work needed to be done,” said Robert Reynolds, president and chief executive.

The fund firm has experienced underperformance for a number of years, particularly in its domestic equity funds.

Team portfolio management has always been a part of the firm’s approach, Mr. Reynolds said.

“But the complexity was too great,’ he said. “It slowed down the best ideas from getting into the fund, and it slowed down getting the ideas you don’t want out of the fund.”

Individual fund managers will be held accountable and rewarded for their performance. If they perform within the top quartile over a three-year period, they would make more money, Mr. Reynolds said.

Those in the bottom quartile would receive no bonus.

The firm is implementing the performance pay program across the board, Mr. Reynolds said.

“It will truly be a meritocracy,’ he said. “We are going to apply the same concept to all of Putnam.

Putnam is also merging six equity funds into larger funds to eliminate product redundancies.

When Mr. Reynolds took over four months ago, the firm had $175 billion in assets.

As of Oct. 31, Putnam had $116 billion in assets under management.