That’s because California State Treasurer Phil Angelides urged the California Pubic Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to back away from their Putnam contracts now worth a combined $1.5 billion. Putnam runs $1.2 billion for CalPERS in a US and global equity fund and $332 million in US equities for CalSTRS.
Last week, the US Securities and Exchange Commission and the Commonwealth ofMassachusetts filed civil fraud proceedings against the Boston-basedPutnam and six of its former portfolio managers for allegedly engaging in unlawful market timing practices (See Putnam Call-Center Rep Says Market-Timing Warnings Were Ignored ).
Angelides wrote in a news release that “The public record reveals a host of severe warning signals: a lack of ethical standards, the lack of appropriate internal controls within Putnam, a fundamental breach of trust between Putnam and its customers, coupled with excessive executive compensation at a time when the firm was failing to police itself.”
“Putnam has failed to meet the standards that we, as fiduciaries, should expect from a firm handling billions of dollars on behalf of pensioners and taxpayers,” Angelides continued. “CalPERS and CalSTRS, as the first and third largest public pension funds in the nation, have an obligation to live up to the vow we have made to demand and expect the highest standards of conduct from the companies with whom we do business.”
Angelides, long a corporate governance activist (See A Call to Action ), sits on the governing board of CalPERS and CalSTRS.
Adding to uncertainty surrounding Putnam’s corporate practices, the company’s CEO, Lawrence Lasser, resigned, after it was disclosed that he had earned more than $160 million over the past five years, a time during which Putnam failed to adequately supervise its most senior executives – and during which many mutual fund customers saw their investment portfolios plummet (See Trading Probes Muscle Out Strong, Putnam Chiefs ).
If CalPERS and CalSTRS sever their Putnam relationships, they will join the funds of six other states that have already done so – Massachusetts, New York, Vermont, Pennsylvania, Rhode Island, Iowa and Arkansas.
Arkansas Joins Anti-Putnam Fund List
The board of the Arkansas Teacher Retirement System became the latest pension fund to dump Putnam in a decision announced Tuesday. Arkansas’ pullout involves more than $500 million in investments.
CalPERS and CalSTRS officials are scheduled to meet with Putnam executives this week.