Putnam Scandal Outflows Continue

December 3, 2003 (PLANSPONSOR.com) - The tidal wave of departing assets from embattled Putnam Investments continued with word that a large UK company and a state of Indiana pension withdrew their business.

Consumer goods giant Unilever said it had fired Putnam from managing part of its UK pension fund and transferred the assets to Barclays Global Investors in November , according to news reports. Putnam was responsible for managing 300 million to 400 million pounds ($516 million to $687 million) of Unilever’s UK pension fund, which was worth about 3.1 billion pounds at the end of March.

Also this week, Indiana’s Teachers’ Retirement Fund likewise withdrew its business, terminating Putnam’s mandate to manage $60 million of its $6.4-billion fund. Officials have shifted the Putnam assets to Franklin Portfolio Associates.

Because of unrelenting outflows, Putnam said on Monday 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 ).