The Massachusetts Pension Reserves Investment Management Board, Boston, terminated Putnam Investments, which ran $1.7 billion in equities, because of performance and what state Treasurer Timothy P. Cahill called legal distractions that would hinder the firm's ability to manage money.
State Street Global Advisors will be transitional manager of the $1 billion Putnam managed in active developed market equities, folding it into the $1.2 billion EAFE index portfolio SSgA runs for the $29 billion system. SSgA also will run the $750 million Putnam handled in active domestic small-cap equities in a Russell 2000 or Russell 2000 Value index fund, at the discretion of SSgA.
MassPRIM will review its domestic and international equity investments with its consultant and may search for new managers. No timeframe was given.
Mr. Cahill said the Putnam termination should send a message to the asset management industry about the need to be forthcoming. "Issues were not brought to our attention. Questions were asked; they were not answered," Mr. Cahill said.
But Jerrold Mitchell, CIO, said the termination should not be seen as a precedent; other cases of questionable manager behavior will be handled on a case-by-case basis.
In a statement following the decision, Putnam said, "We are disappointed about their decision, but hope that we will have the opportunity to manage investments for the PRIM board once again in the future."
Separately, Putnam today said it received a subpoena for documents from the U.S. Attorney for the Southern District of New York related to trading in shares of Putnam mutual funds, and pledged to cooperate fully with the inquiry.