Robert L. Reynolds, Putnam Investments' recently installed chief executive, has received high marks for decisive action to protect investors in an institutional money market fund awash in redemptions, but clients say they need more data points to judge his longer-term prospects for rebuilding the once highflying firm.
The fate of the $12.3 billion Institutional Putnam Prime Money Market fund is one sign of how tricky the environment that Mr. Reynolds faces has become. On Sept. 18, the Boston-based firm said that it had closed the fund amid a surge in redemptions, days after a run on a huge money market fund at New York-based Reserve Management Co. Inc. pushed its net asset value below $1 a share — only the second time that has ever happened.
Putnam's Sept. 24 announcement that it would transfer the fund's $12.3 billion in assets to a $22 billion fund run by Pittsburgh-based money market giant Federated Investors Inc. was "classic Bob Reynolds" — a decisive move that will reassure clients that Putnam, under new management, will put their interests first, said one Boston-based private-equity investor, who asked not to be identified.
A former Putnam sales executive who works in New York agrees: With a run by institutional clients on the fund, Mr. Reynolds avoided a situation where the last ones out the door would be harmed, he said. This executive also asked not to be identified.
In an interview, Mr. Reynolds said that he is "very pleased" with the way things turned out for clients in the money market fund.
"Putnam did the right thing, and in the long run, we're going to be rewarded for that," he said.
The money market drama wasn't the only development in a tumultuous week for Putnam. On Sept. 23, the firm said that Kevin M. Cronin, Putnam's director of investments since 2005, is leaving this month "for personal reasons."
That announcement didn't come as a shock after Montreal-based Power Financial Corp., Putnam's parent, tapped Mr. Reynolds in June to turn the firm around. Before that, Mr. Cronin's success in building up Putnam's fixed-income division had left many observers pegging him as former chief executive Charles "Ed" Haldeman's heir apparent.
Putnam's domestic-equity operation continued to struggle under Mr. Cronin's leadership, and "a change clearly had to be made," noted one Boston-based executive recruiter, who asked not to be identified.
A number of executive recruiters said — and Mr. Reynolds confirmed — that Mr. Cronin jumped and wasn't pushed out. Mr. Cronin couldn't be reached for comment.
Industry veterans said that the latest bout of extreme market volatility is making what already looked to be a difficult challenge for Mr. Reynolds even more daunting. The Putnam turnaround story is "tougher to sell today than it was a month ago," said a New York-based executive recruiter, who asked not to be identified.
Some ex-Putnam officials said that they have heard from former colleagues who are still there that many investment professionals there likewise aren't sure what Mr. Reynolds' long-term plans are for the firm — uncertainty that is keeping people on tenterhooks.
"There's a lot of unease. The shoes haven't begun to drop yet," said the former Putnam sales executive in New York.
Mr. Reynolds said that he is coming to the end of the 90 days he promised himself to "really get your arms around what you have" before taking action.
Industry veterans continue to debate whether he will opt to rebuild Putnam portfolio manager by portfolio manager — a process that could take years before the firm can once again offer marketable investment track records — or make a broader acquisition of a suite of strong teams.
For all his achievements, Mr. Reynolds doesn't have a reputation as a "detail guy," said the New York-based recruiter, who argued that the best play for turning Putnam around could be the acquisition of a strong manufacturing firm such as
Neuberger Berman LLC.
Mr. Reynolds said that he won't rule out an acquisition, "but right now, we are looking to build person by person — a team here, a team there."
The next person that he snags could prove especially important — perhaps an industry veteran who can help revive the performance of Putnam's domestic-equity strategies.
"It's a critical hire for [Mr. Reynolds]. My guess is that he goes with somebody he has a personal comfort level with," said the Boston-based recruiter.
"We've been in the marketplace for some time, looking for someone to run equities ... [and] we're close to bringing someone in," Mr. Reynolds said.
He said that having strong executives leading each asset class is the key to Putnam's resurgence, and he hasn't decided if it makes sense to fill the position that Mr. Cronin is vacating. Whether it adds value to have someone sitting between "those heads and me" has yet to be determined, Mr. Reynolds said.
Douglas Appell is a reporter for sister publication Pensions & Investments.
