Teachers' fund wary of Putnam

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Teachers' fund wary of Putnam
Hoosier group's board of trustees has yet to decide if it will take action.

By April Marciszewski, IndyStar

November 4, 2003

Putnam Investments' future in Indiana public pension plans looks grim.

The Indiana State Teachers' Retirement Fund had $51.3 million invested in Putnam mid-cap equity growth as of June 30, according to the fund's 2003 fiscal operations report, which accounts for only 0.84 percent of the fund's total investment.

The Indiana teachers' fund has been keeping its eye on Putnam since January because of poor performance and high personnel turnover, said Bob Newland, the fund's chief investment officer.

Newland visited Putnam, and a Putnam representative visited the fund's board of trustees in August to talk about what Putnam would do to correct those problems, Newland said.

Newland contacted the trustees on Monday to see if they wanted to have an emergency meeting to decide whether to keep the Putnam investment. By late afternoon, Newland had not heard back from the trustees.

"The big problem with Putnam is their international funds," he said.

The teachers' fund doesn't invest in those funds, but its leaders are questioning whether the international fund problems could bleed into other investments, Newland said.

Add to that Securities and Exchange Commission charges of securities fraud filed against two former Putnam managing directors for excessive short-term trading that could have negatively affected other mutual fund shareholders, according to the SEC.

Last week, six states bailed on Putnam, taking with them more than $4 billion, according to The Associated Press. Putnam Chief Executive Officer Lawrence Lasser resigned Monday, according to the AP.

"It doesn't look good for (Putnam)," Newland said, although he didn't want to speak for the trustees, whose next regular meeting is Dec. 1. The teachers' fund has had the Putnam investment since April 1999.
Indiana's Public Employees Retirement Fund does not have money in Putnam Investments, but the furor over the "market timing" trading has caused some state employees to be wary of other potential problems with mutual fund management.

"Our third-party administrators are going to see if we have any really active trading," said Jeff Heinzmann, trustee of the state's deferred compensation plan and deputy state auditor.

However, Heinzmann doesn't think the deferred compensation plan has any fraud problems.