Mr. Donovan was named CIO overseeing both equity and fixed income at Putnam Investments last week. Sources who asked not to be identified said Mr. Donovan resigned as president of Fidelity Management & Researchs equity division on April 9.
Asked how he had lured Mr. Donovan from his perch as president of the equity division at mutual fund giant Fidelity Investments, Mr. Reynolds cited offering him the opportunity to take total control of Putnams investment operations to be on the ground floor of something that has the potential to be great.
Mr. Donovan is the highest profile hire by Mr. Reynolds, the former Fidelity vice chairman who took Putnams helm in July with marching orders to reverse the firms steady downturn this decade Putnams client assets are currently less than $100 billion, down from a March 2000 high of $425 billion.
Mr. Reynolds has called fixing Putnams domestic equity performance woes the key to reviving the firm. For months, he has promised to bring in a first-rate CIO who could make that division as strong as the firms fixed-income and asset allocation teams, which he has termed top-notch on several occasions.
Mr. Donovan is the most prominent in a string of former Fidelity colleagues whom Mr. Reynolds has brought to Putnam over the past nine months.
He also is one of the most direct hires from Fidelity, as other veterans reuniting with Mr. Reynolds recently had previously left to work at competing Boston-based firms.
For example, Jeffrey R. Carney, a former president of Fidelity Retirement Services, had been serving as president of Bank Of America Retirement and Global Wealth & Investment Management Client Solutions before coming to Putnam in October as senior managing director and head of global marketing and products.
Likewise, Nick C. Thakore and Robert D. Ewing were former Fidelity portfolio managers who jumped to RiverSource Investments in 2002 before rejoining Mr. Reynolds in October as managing directors and portfolio managers of Putnams large-cap equities team.
Executive recruiters say the fact that Mr. Donovan is leaving a powerhouse firm where top money managers and executives garnered some of the highest pay enjoyed by long-only managers, for a firm with less than a tenth of the assets under management could point to continued morale problems at Fidelity, whose executive suite has remained in a state of flux over the past two years.
Since Rodger A. Lawson unexpectedly rejoined Fidelity in August 2007 as president of FMR Corp., the group has tapped a number of outsiders for other top spots an anomaly for a firm that had largely turned to insiders for high-level jobs in the past.
New arrivals to Fidelity have included Kevin C. Uebelein, Prudential Financials CIO of international businesses who was tapped in June as president and CEO of Fidelitys institutional asset management arm, Pyramis Global Advisors; Michael E. Wilens, a senior executive with Thomson Reuters who joined Fidelity as head of asset management in July; and Christopher Sullivan, a managing director and co-head of fixed income with Goldman Sachs Asset Management, who was named president of FMRs bond group March 20.
One Boston-area executive recruiter said he wouldnt be surprised to see a continued exodus of veteran Fidelity executives with 10 to 20 years of experience at the firm. Mr. Reynolds by many accounts a popular presence during his long management stint with Fidelity will always be the first phone call for those prospective refugees, he said.
Whether Putnam and its Canadian parent, Montreal-based Power Financial can afford to hire that much additional high-priced talent is an open question. In February, Putnam confirmed it would lay off roughly 10% of its staff in response to the depressing impact on revenues from the sharp decline in equity markets over the past year a move that some observers said wouldnt be sufficient to ensure an operating profit for the firm this year.
Still, Putnam has pointed to some signs of recovery in recent weeks, noting that the suite of absolute-return mutual funds the firm launched in January had garnered $150 million in net inflows in their first 10 weeks.