Florida Drops Invesco and Debates Dropping Putnam

December 11, 2003 (PLANSPONSOR.com)—Only days after formal chargers were filed against Invesco Funds, a division of AMVESCAP PLC, Florida officials dropped its $2 million mutual fund from the state 401(k) plan and are now debating what to do with two Putnam Investments funds also in the plan.

Florida officials said the decision to drop the Invesco fund was made in November, before charges were filed, and cited the fund’s poor long-term performance as the deciding factor. The state is also debating whether or not to keep a$700,000 Invesco fixed income fund,theInvesco Stable Value Fund, in the retirement plan.   That fundis managed by Invesco Institutional, a separate division of AMVESCAP that is not being investigated in the ongoing mutual fund scandal.

The two Putnam Investments funds on the state’s watch list are the International Growth Fund, with $3.1 million, and the $17.4 million Putnam Co-Mingled Trust Account, which isn’t a mutual fund and are offered through the state’s 401(a) plan, which is offered to employees who recently left the state’s traditional retirement plan.

This is the beginning of public retirement systems reacting to charged made against Invesco just last week (see Prosecutors: Invesco Engaged in Massive Market Timing Scheme).

Putnam suffered great losses after being implicated in the mutual fund scandal and reported its total assets under management fell by $32 billion to $245 billion in November.

Ten other state pensions dumped Putnam last month (see  More Pensions Pull Money From Putnam ), as did such companies as Wal-Mart Stores, Merck & Co. and Revlon (see  Wal-Mart Bails Out of Putnam Funds ). The customer exodus comes amid investigations of Putnam and the mutual fund industry by the US Securities and Exchange Commission, as well as by state officials in New York and Massachusetts (see  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).

Those probes have accused Putnam of allowing some of its clients to engage in late trading and market timing even though Putnam’s prospectus says it discourages such activity. Also, some of its fund managers were accused of making market-timed trades for personal gain (see  Putnam Excuses Two More Fund Managers ).  In a settlement with the SEC, Putnam admitted no wrongdoing, but agreed to reforms and future reimbursement to investors (see  Putnam, SEC Reach Securities Fraud Settlement ).