GLOBAL - A swelling number of pension funds have terminated their relationship with Putnam Investments, the beleaguered US asset manager.
Putnam haemorrhaged more than $54bn in the last three months of 2003 after being embroiled in a market timing scandal.
However, while pension funds interviewed by Global Pensions cited the scandal as one of their reasons for cutting Putnam loose, they also said performance and administration fees played a large role in their decision as well.
“American Funds had a better history of investment performance and lower administration fees,” said Jody Judge, a spokesman for Meredith Corp., which terminated its 401(k) with Putnam.
Furthermore, in what looks to be a case of a self-fulfilling prophecy, the Nevada Deferred Compensation Committee stopped using Putnam as one of the options for its DC fund over concerns that the large outflow of funds would adversely affect performance.
“It was a combination of all of those things,” said Mary Keating, vice chair for the committee. “Because there was a large withdrawal from other funds, like ours, there would definitely be an impact on Putnam’s performance. We’re just ensuring our fiduciary responsibility in providing best of class investment options for our participants.”
One fund that did decide to stick with Putnam, the Connecticut Retirement Plans & Trust Funds, has done so after renegotiating its administrative fee structure to more accurately reflect performance, saving the state fund $225,000, according to information from the Connecticut State Treasurers’ office. But Putnam will remain on the watchlist, state officials added.
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