Putnam Loses Fla. Pension Contract

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Putnam Loses Fla. Pension Contract

Bloomberg News

March 9, 2004

Putnam Investments, the first mutual fund company sued for alleged fraud stemming from improper trading, has lost a contract to oversee about $950 million for Florida's state pension system.

Putnam, based in Boston, was replaced last month as manager of a $500 million international-equity portfolio and a global-stock portfolio with about $450 million of assets, said Michael McCauley, director of investment service and communication for the Florida State Board of Administration in Tallahassee.

The Florida board hired New Star Asset Management Ltd. of London to take over the $500 million account and Bank of Ireland Asset Management to oversee the second portfolio, he said, adding that Putnam was fired because of subpar performance and "organizational issues" related to the regulatory probe.

Putnam, a unit of New York-based Marsh & McLennan Cos., suffered about $54 billion of mutual fund and institutional client withdrawals during the final three months of last year. The redemptions followed civil fraud complaints from the US Securities and Exchange Commission and Massachusetts regulators. Putnam oversaw $236 billion for customers as of Jan. 31.

The Florida board, which oversees the fourth-largest US pension system, with $135 billion in assets, put Putnam on its "watch list" Oct. 28, the day the lawsuits were filed.

Putnam was accused of failing to stop portfolio managers from making frequent trades in mutual funds they oversaw. Several of the employees worked on the international and global equity teams. Since the suits were filed, public pension clients in California, Massachusetts, and Pennsylvania, among others, fired Putnam. The terminations led to the replacement of Lawrence Lasser as chief executive.

Putnam reached a partial settlement with the SEC in November, agreeing to make changes in corporate governance and compliance practices. The state complaint is pending and a monetary penalty may still be assessed.