Monday, April 03, 2006

Ed Haldeman: Putnam is not up for sale

What are your thoughts about the assertion that you're cleaning up Putnam for sale to another asset management company?

That's the question I asked Ed Haldeman of Putnam Investments during the Q&A portion of his presentation today to the Boston Security Analysts Society.

We're cleaning up Putnam for us, replied Haldeman, adding that the firm has worked hard to broaden employees' ownership of the firm. Stock is given to employees at a 30% discount to the appraised value.

"I wish every employee at Putnam could own stock," said Haldeman. But the restrictions of private equity prevent that. Putnam is 15%-owned by employees, the remainder is owned by Marsh & McLennan (MMC).

Haldeman said that:
  • MMC is a very satisfied owner
  • The relationship of Putnam and its management with MMC is very positive
  • There is geographic separation between Putnam in Boston and MMC senior management in New York City
However, Haldeman also said, "My responsibility is to make sure Putnam is strong irrespective of ownership." He added that Putnam is in a strong financial position with a strong management team.

The main points of Haldeman's formal presentation focused on how the firm has managed change during his roughly two years on the job. That included:
  1. Create a vision or mission: "What we do is take care of other people's money" instead of "we sell mutual funds"
  2. Create a culture
  3. Create an agenda: "Manage money for clients in a way that's consistent, dependable and superior"
  4. Spend time outside my office
  5. Get a few quick wins

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Anonymous Anonymous said...

Interesting commentary by Mr. Haldeman at the BSAS lunch.

Industry chatter suggests that two of his three points were wrong: MMC is not a very satisfied owner (and shouldn't be) and relations between managements of Putnam and MMC are positive only in that Haldeman & Co. have been give about 12 months to improve results, or else . . . . . .

Haldeman was known as a straight shooter in his younger days; these days, maybe the $14.5 mil. annual comp has gone to his head.

Investment results at Putnam are consistently mediocre or worse and fund outflows continue apace - my best guess is Putnam gets sold to a big strategic buyer (Franklin Resources would be a leading contender) in 4Q '06 or 1Q '07

8:07 PM  
Blogger SusanW said...

Thanks for your comment.

Haldeman mentioned that portfolio managers' compensation has been tied to their funds' long-term performance. Three-year and five-year performance are weighted more heavily than one-year performance, so managers aren't tempted to take too much risk to deliver short-term performance.

11:23 AM  
Anonymous Anonymous said...


One of the problems with Putnam's investment approach is that Haldeman has them entirely focused on beating their Lipper peer group rather than beating their benchmark.

The problem with this approach is that it sets the bar too low (ie, most active managers underperform so even if you consistently outperform your peer group by a modest margin you're still likely underperforming your benchmark), it's unexciting (if there's no chance of a big up year potential clients might as well own even more consistent and lower cost index funds) and the risk constraints are so tight that most products have been turned into closet index funds run without imagination.

One might also wonder why Josh Brooks has been given so much responsibility at such a young age without having a track record as a professional investor, but that's a topic for a different time . . . .

12:49 PM  

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