CIGNA has selected Artisan Partners for the mandate, recasting the fund as the International Growth/ Artisan Partners Fund, to reflect the change. The decision was effective on November 10, with Artisan assuming management of the fund today, CIGNA spokesman Ronald Hurt told PLANSPONSOR.com .
CIGNA cited recent changes within Putnam’s senior management and investment team leadership, as well as overall organizational uncertainty as reason for the decision to replace the Boston-based manager. Further, CIGNA Retirement & Investment Services’ Senior Vice President of Investment Advisory and Products, George Palms, speaking with PLANSPONSOR.com said a visit to the portfolio management team’s headquarters provided further evidence of the need to act.
“We had a discussion with the team running the international institution portfolio, and they were concerned with how they were going to manage money differently to account for all of the fund outflows. This led to the conclusion that we no longer had confidence in how that team would manage the fund,” Palms said in explaining CIGNA’s decision.
Announcement of the change was then made to defined contribution plan sponsor clients of CIGNA’s Retirement & Investment Services division via a letter from Phil Waldeck, Senior Vice President, Client Solutions. The letter outlined the changes that influenced CIGNA’s decision in addition to reference the impact of the site visit with Putnam’s investment team.
“We also want to assure you [CIGNA’s plan sponsor clients] that the market timing activities involved in these investigations do not involve our Fund,” Waldeck said in the letter.
The letter also points to analysis conducted by the firm’s Due Diligence Advisor (DDA) program as further impetus for change. DDA takes an unbiased, institutional, qualitative and quantitative approach to investment option analysis, review, and sponsor reporting, Hurt said. Thus, the program is designed to support Cigna’s clients’ roles as fiduciaries and allows such actions as identifying potential replacement managers.
“You are able to move managers in and out without any disruption,” Hurt said speaking about DDA. “You have the ability to address the things without disrupting the participant, the whole idea is to take a more long term thoughtful approach, and this is just one piece to that approach.”
By applying this standard, CIGNA said it was able to “quickly and thoughtfully” select Artisan. In total, Artisan will be assuming an investment portfolio of approximately $150 million, which covers defined contribution and defined benefit investments in addition to investments made through other programs at CIGNA.
At the same time though, given the current environment of mutual fund misgivings, CIGNA feels confident in their other investment options. “We have a process where we put funds on our watch list,” said Palms. “In terms of our institutional funds, we are generally comfortable with the ones we got.”
While CIGNA’s move is significant, it pales in comparison to the parade of assets that have been flowing out of Putnam since the mutual fund firm was implicated on September 26 in a probe by Massachusetts Secretary of State William Galvin (See Union K Plan Trading Activity Leads to Putnam Fund Probe ) into possible market-timing and late-trading violations. Overall, the total withdrawal of assets to date represent approximately 5% of Putnam’s assets – a pace that has accelerated following disclosures of the involvement of Putnam fund managers in the alleged trading violations (see Market Timing Leads to “Late” Departure of Putnam Fund Managers ).
Among the groups pulling assets from the embattled mutual fund company are public pension funds, a list that includes Pennsylvania, Vermont, Massachusetts, Rhode Island and Iowa have pulled billions out of Putnam. (See PA, RI, VT, IA, NY Pensions Fire Putnam ), as have Hawaii, Texas (see Texas Joins State Pensions Bailing On Putnam ), and Nevada.