Sunday, March 05, 2006

Whither Putnam Investments?

Here's a comment I got in response to my posting on Jack Bogle's recent talk.

Putnam’s 5,000 jobs are at grave risk of disappearing under a few scenarios I can think of. If MMC sells Putnam to a third party bidder that is either larger than Putnam or has better performance (not hard) than Putnam, the acquiring firm could make it an asset acquisition where the monies transfer to a new city but the people don’t. Given Putnam’s abysmal performance, how notoriously bad the Putnam name is, and how broken their investment process is, this is very probable. One could easily argue that the Putnam brand name is either worthless or even that it has a negative value. Me, I’d argue that it has a negative value.

I provided Jack with 4 alternatives that I thought MMC could choose and Jack thought of a fifth alternative that was better than the four I thought of. However, given MMC’s situation and their proven lack of corporate ethics, I don’t see them giving a rat’s patooie about their fund shareholders and choosing mutualization. Probably the best outcome as far as Boston and Putnam’s employees are concerned is an employee led buy-out which takes Putnam private. There’s no place for publicly held mutual fund firms.

Here’s how I see Putnam’s future:

1) MMC sells them to a third party which leads to the assets transferring and most Putnamites losing their jobs (Bad Outcome for Boston)

2) MMC sells them to a third party but the third party keeps the jobs in Boston (Okay outcome for Boston)

3) MMC spins off Putnam to its shareholders (Okay outcome for Boston but unlikely since this doesn’t get MMC paid)

4) MMC mutualizes Putnam to benefit the mutual fund shareholders (Good Outcome for Boston but Putnam fund shareholders are not MMC shareholders so I don’t see this happening)

5) Putnam employees do an LBO and take the firm private (Good Outcome for Boston)

At this point, Putnam is toast. Jack may think highly of Ed Haldeman but I am not very confident in his abilities. He’s either been Co-CIO or CEO for four plus years and Putnam’s investment process remains beyond broken. I can pick my nose better than Putnam’s PM’s can pick stocks. If they hired monkeys to throw darts they’d improve performance. The marketing staff has lost all confidence in the firm’s investment managers and believes a widespread purge of investment staff is long overdue. My bet is Putnam has less than a year to turn the ship around or they’re finished.

The commentator asked to remain anonymous.



Anonymous Anonymous said...

Nice blog.

The anonymous emailer listed all the possible outcomes for Putnam but didn't analyze them.

Putnam is a tainted brand with a lousy investment record under Haldeman. By the end of '06 or '07 Putnam's parent Marsh Mac will likely try to salvage some value by selling the carcass to a strategic buyer - Franklin Resources would be my leading contender, though a Merrill/Blackrock style cram-together can't be ruled out . . . . . .

9:35 PM  

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