Putnam Investments will seek shareholder approval this fall to institute performance fees on its 13 growth, international and global equity funds as well as create a breakpoint system across its fund families that will further reduce management fees as total assets under management rises.
If one of the 13 equity funds should outperform its benchmark on a rolling three-year calculation, the move will add an average of 15% to 20% to the management fee, or 3% of the amount gained. Conversely, if the fund underperforms, the shareholder would receive an equivalent fee reduction, said Jeffrey Carney, senior managing director, global marketing and products, at Putnam.
“The performance fee makes sense for the more aggressive mandates,” he said, adding the proposal does not include value, fixed-income or sector funds.
Performance fees were instituted on Putnam's funds launched in January.
“I thought our equity-fund fees were very reasonable, but I've always had the belief that if you were trying to be shareholder friendly, you need to put yourself on the same side of the table with the shareholder,” said Robert Reynolds, president and CEO.
The proposed breakpoint system would take into consideration the assets of all the retail funds in aggregate, which totaled $52 billion as of June 30, and award shareholders a benefit of scale when the total assets increased in size, in $5 billion increments.
Currently, the funds have individual breakpoints, which allow shareholders to benefit from scale when an individual fund reaches a specific asset level.
The proxy documents are expected to be mailed in mid-September; the shareholder meeting is Nov. 19. If the proposals are passed, they would go into effect Jan. 1.
The company also announced cuts in its management fees on retail fixed-income, asset-allocation and target-date mutual fund categories, effective Aug. 1.
“It goes back to when I first joined Putnam a year ago, and we wanted to do what would be shareholder friendly and adviser friendly,” said Mr. Reynolds. “I think our fee structure is now very competitive in the industry.”
Sue Asci is a reporter at InvestmentNews, a sister publication of Pensions & Investments.