Putnam Investments has a new spring in its step as Robert L. Reynolds' first full year as CEO draws to a close.
After a decade of misery, investment performance has rebounded dramatically this year, and a long period of net outflows appears poised to end.
Despite that progress, market veterans say Putnam and its parent, Power Financial Corp., continue to face tough choices, such as the decision late last week to exit the actively managed currency institutional segregated account business. In addition, last week's layoff of 5% of Putnam's work force is a sign of short-term challenges.
Others believe an add-on acquisition might be needed to put the money manager on the path of sustainable profitability and growth anytime soon.
For now, what started out looking like a painful year of rebuilding for the one-time industry powerhouse has turned out to be Putnam's best since 1999.
Year to date, key equity strategies are enjoying their best relative performance in a decade. The $3.3 billion Putnam Voyager fund is among the top 2% of competitors in Morningstar Inc.'s large-cap growth equity category, and two large-cap value funds — the $5 billion Putnam Growth & Income fund and the $2.8 billion Putnam Equity Income fund — are both top-quartile performers.
The Boston-based company's fixed-income strategies have shone as well. Two intermediate bond funds — the $1.2 billion Putnam Income fund and the $1.3 billion Putnam U.S. Government Income fund — are both in the top percentile of their respective Morningstar categories year to date.
The turnaround has pleased executives at Putnam's Montreal-based parent, who bought the firm for $3.9 billion in August 2007, but had to write off a chunk of the value of its investment as the market crisis of the past two years resulted in Putnam's assets under management dropping to a low of $95.7 billion this past February. (AUM rebounded to $115 billion as of Nov. 30, up 20% from that recent low although still a fraction of the record $425 billion under management as of March 2000.)
“We think Putnam has made very strong progress in virtually every dimension of its business,” Jeffrey Orr, the CEO of Power Financial and chairman of Putnam's board of directors, said in a recent interview. That progress, he said, includes performance, but extends to such areas as product introductions and distribution initiatives as well.
The money manager's performance gains might be providing some hope for Putnam's long-suffering clients as well.
After years where the firm's once-hefty mutual fund business routinely saw net outflows of $1 billion a month or more, this October a scant $98 million left Putnam's doors.