The significance of the recently announced cutbacks by several asset management companies triggered by the declining market, is not in their immediate effect on business for the companies, according to analysts. Most of the cutbacks were in operations positions, such as telephone operators - people who were hired to handle increased volume during the market's surge. The cutbacks were significant, though, because they suggest that those firms believe they were over-staffed for the future, and that they are not anticipating a substantial market rebound soon, analysts said.

In February, Janus of Denver announced that it was eliminating 468 jobs from its operations unit, representing a cutback of 22 percent of that unit. Last month, Putnam Investments of Boston laid off 21 workers, according to Matt Keenan, a spokesperson for Putnam, who in February said the company had no intention of letting anyone go. Two weeks ago, the Charles Schwab Corporation of San Francisco and American Skandia of Shelton, Conn. each announced cutbacks of about 13 percent of their workforces, citing the need to limit operating expenses due to the declining market.

Spokespersons for both Fidelity Investments of Boston and the Vanguard Group of Malvern, Pa. say neither company has plans to cutback their workforces.

Schwab expects that its cutbacks will reduce operating expenses by $40 million to $45 million per quarter, beginning in the third quarter of 2001. American Skandia estimates annual savings of over $35 million.

Janus did not release figures on expected cost savings from the cutbacks. The company made the cutbacks because of a lack of need for as many employees in its operations unit due to technological efficiencies, according to Shelly Peterson. Cost reduction was not the driving force, she said.

"I think in Janus' case, it's something they were going to do anyway, so it's sort of ... convenient timing that it happened when the market is heading south on them," said Steve Hahn, a stock analyst for Morningstar of Chicago. "But certainly, they were definitely over-staffed in one of their areas."

Cutting back in a down market is not very unusual, according to Kunal Kapoor, senior fund analyst with Morningstar. One reason is that companies were forced to hire many workers to handle business during the market's upswing, he said.

"One thing that has taken place over the last few years is that they have hired very heavily in their support divisions, in terms of incoming calls and things like that," said Kapoor. "It's customary, when people start pulling back in terms of how much they're investing, they don't require as much call support as you did maybe a year ago."

While the demand for operations staff had increased, the hiring the companies did was probably excessive and a reason for the major cutbacks, according to Jim Folwell, an analyst with Cerulli Associates of Boston.

"There tends to be some overkill at the companies, hiring employees in customer service areas where they could run a lot leaner," said Hahn. "When times are good, they tend to overstaff in order to compensate for the high levels of fund flows. [These companies] got such a massive amount of money, they needed to go out and hire a bunch of people very quickly in order to get those kinds of requests into accounts and processed. So then they tend to run a little heavy on that and that seems to be an area that, certainly if fund flows disappear, that's going to be one of the first areas that they cut."

One of the reasons operational positions are the first expenses cut when a company needs to reduce costs is that there are really only two areas where companies can immediately cut costs and save money, according to Hahn. The first area is overhead and back office and the other is marketing expenses, but the latter is an area in which companies want to avoid reductions, he said.

"In general, a lot of firms would tend to not want to cut marketing expenses in a lot of situations because their main goal is to increase their cash flows," said Hahn. "If they aren't marketing to the best of [their] ability, they're not going to gain those cash flows which only [compiles] the problem."

The cutbacks will probably not have a major effect on how the companies do business because the jobs eliminated were on the operations side of the companies rather than the investment side, said Kapoor.

"They're all pretty big companies so the actual number of people that were let go is probably not going to have material impact on their business or service, I suspect," said Folwell.

Although smaller fund firms have not announced cutbacks, they are cutting costs simply by not rehiring departing employees in the operations area, according to Hahn.

While the cutbacks may not have significant effects on companies' ability to service clients, they do suggest a negative outlook for the immediate future, according to analysts.

"I think it sends a signal that the companies were in a place where they feel that they had more than adequate staffing for the level of business they expect in the future," said Folwell.

Customer service employees could be re-hired in the event of a market upswing, but the companies would not have undergone the cutbacks if they expected one in the immediate future, according to Kapoor.

"The prolonged duration and severity of the market pullback, along with the difficulty in predicting the timing of its culmination, have led to these hard decisions," said Wade Dokken, CEO of American Skandia in a statement when the company announced its cutbacks.

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