Putnam parent Marsh & McLennan Cos. is poised to recover after suffering $6.6 billion in outflows, according to Chief Executive Michael Cherkasky.

The outflows aren't over quite yet, said Cherkasky, who said that the firm expects investors to yank another $5 billion by the middle of the year due, in part, to the end of a partnership with an Australian company, according to MarketWatch.  Much of the outflows are due to investors, who punished Boston-based Putnam for its part in the mutual fund scandals.

But by the third quarter, Cherkasky contends, the tide will turn, bringing positive inflows to the company.

"First, we expect that institutional flows will turn positive in the third quarter. Our request for proposal activity is up, and we're winning more as the rest of our institutional portfolio becomes more stable," he said.

Cherkasky added that mutual fund sales were "steadily" rising in step with the introduction of new products, such as Putnam's global asset allocation funds.

"Finally we are optimistic about new alliances and opportunities being pursued in Europe, Japan  and Australia," Cherkasky said. "We continue to be confident in the future of Putnam."

 

Gabriel Solomon, an analyst at T. Rowe Price Group in Baltimore, agreed that Putnam is likely to begin enjoying inflows, but warned that they probably won't come quickly.

"It's like turning around a tanker," said Solomon, whose firm is the second-biggest institutional investor in Marsh & McLennan. Flows come a little further in, and  then back up a little, and continue this pattern until they are on the right course.  "I think we are getting to the point where new sales outpace the runoff of old clients that are leaving," he said.

"The revenue and margin trends at the insurance brokerage unit are improving, and that's key," said Solomon. Things might improve even more quickly if Marsh, the world's largest insurance broker, were to spin Putnam off, he said, allowing both Marsh and Putnam to be more efficiently operated. 

Cherkasky's comments during the conference call with analysts made that possibility seem unlikely. "Running Marsh & McLennan as one company allows us to be more efficient and effective with the appropriate level of oversight," he said. "This benefits our clients and our shareholders."

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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