More Pensions Pull Money From Putnam

November 21, 2003 ( - Add Washington State and the City of Milwaukee as the latest pension funds to seek replacements for investments managed by Putnam Investments.

Washington State Investment Board voted yesterday to replace Putnam as soon as a new manger is found for the $584.6 million in international stock investments the embattled firm currently oversees.   The current investment contract expires in June, according to a Boston Globe report.

“I believe Putnam will survive this, but it’s going to take years for them to cut their losses,” Gary Bruebaker , chief investment officer for  Washington State, told the state investment board at its monthly meeting yesterday in Olympia, Washington. “Integrity is not something you kind of have.”

Earlier this month Washington state took a cautious approach to its relationship with Putnam, electing to place the Boston-based investment company on a “watch list” while other public pension funds were terminating their agreements with Putnam.   Included in the first wave of those funds heading for the exits were Pennsylvania, Rhode Island, Vermont, New York and Iowa, which all followed the lead of Massachusetts (See PA, RI, VT, IA, NY Pensions Fire Putnam ) .   Meanwhile another public pension fund that joined Washington on the sidelines, the California Public Employees’ Retirement System (CalPERS), has also recently announced its decision to dump Putnam.

Old Milwaukee

Also yesterday, the City of Milwaukee Pension Board committee voted to yank approximately $277 million out of Putnam.   The firm is managing the international stock investments in the city pension fund’s $3.89 billion portfolio and will remain manager of the international funds until the search for a new manager is completed, according to a Milwaukee Journal Sentinel report.

Right now, the Journal Sentinel cites the top five candidates to replace Putnam as:

  • Artisan Funds
  • Fidelity Investments
  • JP Morgan Chase & Co
  • MFS Investment Management
  • William Blair & Co.

Milwaukee’s international investments were being managed by Omid   Kamshad and Justin Scott, who were forced out of their jobs last month for trading shares of funds they ran and allowing members of a New York boilermakers’ union to make market timing trades (See Market Timing Leads to “Late” Departure of Putnam Fund Managers ).  While the practice of quick-paced buying and selling of mutual fund shares is not illegal per se, it is prohibited by many companies, including Putnam, because it drives up trading costs and waters down returns for long-term investors.

Although no pension fund money was affected by the trading, the accusations shook pension officials’ trust in Putnam, Shannon said.    That wasn’t the only reason to switch from Putnam, Shannon said. Since the start of the year, the Milwaukee pension fund’s international investments have grown 18.8%, while an international stock index has risen 25.2% in the same period, said Jennifer Shannon, the pension fund’s chief investment officer.