For a mutual fund firm that bills itself as conservative, Putnam Investments is dabbling in a decidedly more alternative lifestyle.
Since announcing its joint venture with buyout firm Thomas H. Lee Co. last summer, the nation's fourth-largest fund company with $390 billion under management is courting wealthy individuals and institutional investors with so-called alternative investments -- offerings that don't quite jibe with its risk-averse image.
Through their joint TH Lee Putnam Capital, the two Boston firms are raising between $500 million and $1 billion for a private equity Internet fund. The portfolio, called TH Lee Putnam Internet Partners, will make investments in later-stage e-commerce and Internet companies and be available only to institutional investors. It will be managed by Jeffrey Coates, the former head of technology investing at GE Capital Services Corp.
There's also talk that TH Lee Putnam Capital -- Putnam owns 25%, Lee the rest -- plans to get into the hedge fund business. The company is believed to be planning to launch several hedge funds this year to be headed by Putnam money managers, according to industry sources.
Scott Maxwell, a Putnam managing director who oversees his company's relationship with Lee, dismissed such talk as speculation.
"There's no plan right now to launch any hedge funds," he said, "although, if you talk to me a month from now, there might be."
With affluent investors showing an increased appetite for alternative investments, fund companies like Alliance Capital Management LP, New York, and Wellington Management Co., Boston, have added hedge funds to their menu of offerings in recent years.
Then there's the all-important profit motive. Hedge funds that perform well can be lucrative for money managers, because they generally charge upward of 1% of the assets they manage each year, plus 20% of any gains above their benchmark. The average U.S. stock mutual fund, by contrast, charges 1.44% of assets, according to Morningstar Inc., the Chicago mutual fund tracker.
"The mutual fund companies have got to be attracted to the higher potential fees that a hedge fund can bring to the table," said E. Lee Hennessee, founder of Hennessee Group LLC, a hedge fund consulting firm in New York.
For its part, Putnam is mum about what other alternative investments it is considering.