Putnam agreed in principle to acquire the 50% stake in PanAgora Asset Management that has been held by Lehman Brothers Inc. Terms of the deal were not disclosed.
The remaining 50% share in PanAgora is held by Japan's Nippon Life Group. In June, Putnam entered a strategic alliance with Nippon Life jointly to develop investment products and manage assets. It also formed an alliance with Nippon Life's Nissay Asset Management Co. to manage international products for Japanese pension funds.
John E. Brewer, executive director of the $380 million Firemen's Retirement System of St. Louis, believes the change will have "no big effect" on that fund. He pointed out PanAgora's management is not expected to change and it still has a 50-50 ownership arrangement. PanAgora runs about $110 million for the fund in an equity and fixed-income balanced account.
John J. Gallahue Jr., executive director of the $1.5 billion Massachusetts Bay Transportation Authority Retirement Fund, Boston, has "no concerns at all" about the ownership change. "If anything, it's a plus, because PanAgora will be able to tap the resources of Putnam," he said.
The Massachusetts Bay Transportation fund uses both PanAgora and Putnam. PanAgora handles $60 million of the fund's assets in an enhanced Morgan Stanley Capital International Europe Australasia Far East Index portfolio. Putnam runs two portfolios for the fund - a non-U.S. equities portfolio and a U.S. growth stock portfolio that total $175 million, said Mr. Gallahue.
According to Steven Spiegel, Putnam senior managing director, the PanAgora deal "extends" Putnam's new liaison with Nippon Life and broadens Putnam's ties with PanAgora. The latter is now subadviser to the S&P 500 Index Fund that Putnam offers its defined contribution clients.
PanAgora will operate as an independent entity. While Putnam will have representation on PanAgora's board, it will not participate in PanAgora's day-to-day investing or business operations.
Bruce Clarke, PanAgora's chief executive, said that, while "this is just a transaction between Lehman and Putnam, we view it as positive. Having Putnam as a shareholder . . . can bring (added) strategic insight to our board." And by being a subadviser to one or more Putnam funds "gives us distribution (into the D.C. market) that we wouldn't otherwise have. Over time, we may discover other areas of cooperation," he said.
While the $125 million pension fund of Goulds Pumps, Fairport, N.Y., no longer is a PanAgora client, (it terminated PanAgora in March because it no longer wanted an S&P 400 midcap indexed fund) Assistant Treasurer David F. DiRoma still thinks highly of the firm. As he explains, "a lot of people (at PanAgora) are on the cutting edge in mathematics, and they are doing things with quantitative funds that are very interesting to plan sponsors in the indexed-plus area."
Thus, "Putnam is getting a very good organization," he said.