“We are getting this behind us,” says Putnam
GLOBAL – A top executive at Putnam Investments has told IPE in an interview that the firm is putting the improper trading scandal quickly behind it.
“Even though 80 mutual fund firms are being investigated for any one of the three issues of late trading, formal arrangements, market timing and failure to supervise, we are getting this behind us very quickly by setting a standard, by remedies and taking action on behalf of the clients, so that no client can get away with market timing,” said Steve Oristaglio, co-head of investments in an interview.
“We have taken an industry lead in introducing exchange fees now where such changes are made too frequently.”
“Other measures include governance compliance reviews, holding period regarding internal trading, among other measures of control and supervision,” Oristaglio said during a visit to London.
“We have agreed to make full restitution for whatever losses have occurred,” he said, adding that an independent group is coming in to determine them.
“We do not think that these will turn out to be that significant, perhaps several million dollars.” In addition, the parent group MMC, has sent in a representative to review all Putnam’s procedures and to report back.
“What’s given us and our clients comfort is the strength and vehemence of the MMC support,” added Stephen Cohen, head of Putnam’s London-based European business.
“Within Putnam there was an internal view that because we have taken action in 2000 and every thing had for the most part stopped then, so this would regarded as old news in that Putnam had done something.”
Within Europe, there have been one or two terminations. “They have been products where clients have had products where the investment team has been directly impacted by the manager departures, which they say is sufficient cause for termination,” said Cohen.
For Putnam’s Dublin-based funds, Cohen sees no reason to think that they could be subject to the same problems as those in the US.
“There is no evidence of market timing in the Dublin funds,” Cohen said. “We have the same checks and controls that apply in the US”.
Oristaglio concluded: “The situation is that whatever mistakes we’ve made, and we are paying the price for these. When all the dust settles, I believe we will be seen to have committed some infractions that are relatively small by industry standards. We regret it and certainly we could have done better, but definitely not the most serious issue in the industry.”
As at November 14, Putnam had 256 billion dollars in assets under management, down from 263 billion dollars a week before and 277 billion dollars two weeks ago.
“To date, Putnam has found that there has been sufficient liquidity in the market to manage the client withdrawals and redemptions without any increase in portfolio transactions costs,” the firm said in a regulatory filing yesterday.
On Monday Putnam suffered a further blow when the investment committee of CalPERS, the California Public Employees’ Retirement System, voted to terminate its two mandates with Putnam, reportedly worth around 1.2 billion dollars.