BOSTON — When it comes to Putnam Investments, it is the performance — not the parent — that matters, financial advisers say.
Putnam last week said that Winnipeg, Manitoba-based Great-West Lifeco Inc., a unit of Power Financial Corp. of Montreal, agreed to acquire the money manager from New York-based insurance broker Marsh & McLennan Cos. Inc. for $3.9 billion in a deal expected to close by midyear.
In a statement, John Hill, chairman of the board of trustees that oversees Putnam Investments’ funds, hailed the deal — which preserves both chief executive Charles “Ed” Haldeman Jr.’s job and the Boston-based firm’s storied name — as “good for investors.”
Still, it will take more than talk to convince some people.
“Would I go back to Putnam? It would take a lot,” said Brian O’Rourke, the principal at O’Rourke & Co. Inc., a Boston-based
financial planning firm, who took his clients out of Putnam’s funds in the late 1990s.
Years ago, Putnam was a “blue-chip name,” said Mr. O’Rourke, who has worked in financial services in Boston for 25 years. Although the firm’s reputation was damaged by the fund industry’s trading scandals that erupted in 2003, many investors had already been bailing out, he said.
“Where they really hurt themselves prior to the scandal was style drift in their funds,” said Mr. O’Rourke, who manages about $150 million for professional athletes and other clients.
Mr. Haldeman has done “a miraculous job” of keeping Putnam alive in the wake of the fund scandal, he said.
“Frankly, I thought they were going to be out of business at that time,” Mr. O’Rourke said.
For any professional, the sale “won’t make one bit of difference” unless it leads to a dramatic change in the people, process or philosophy at the firm, said Harold Evensky, president of Coral Gables, Fla.-based Evensky & Katz LLC.
Still, a big marketing effort by Power may persuade some to consider Putnam.
“Those advisers that are driven by a marketing story — if the new company pumps a lot of money into marketing, yeah, you could see more flow of funds into Putnam,” said Mr. Evensky, whose fee-based firm manages more than $500 million for clients.
The adviser, who doesn’t recall ever using Putnam funds for clients, said he suspects that Putnam’s investor outflows are “simply a function of money running away from poor relative performance.”
Although data from Chicago-based Morningstar Inc. show improvement, Putnam’s performance isn’t eye-popping. For the one-year period ended Dec. 31, 53% of the firm’s equity funds beat their category average. That is an improvement over their five-year numbers, when fewer than 28% beat peers.
The fact that a unit of Power — and not a company with an existing U.S. fund operation — is buying Putnam means the latter won’t face the issues and challenges that come with trying to merge two fund families, said Geoff Bobroff, a mutual fund consultant based in East Greenwich, R.I.
The deal’s announcement also adds stability that should enhance Putnam’s ability to add new personnel, he said. Investors, however, want to see performance.
“Until performance is seen in the numbers, they’ll still be viewed — no matter who the owner of Putnam is — in the same light,” Mr. Bobroff said.
A bright spot at Putnam is Boston-based PanAgora Asset Management Inc., according to Steve Charlton, a managing partner at Cambridge, Mass.-based New England Pension Consultants, which counsels its clients on how to allocate more than $250 billion in retirement and other money. Putnam owns 80% of PanAgora, a quantitative investment manager.
“PanAgora is a firm that’s actually gotten a lot of business, not only from our clients but lots of clients,” Mr. Charlton said.
Kathie O’Donnell can be reached at
[email protected].
