Stressing that the reorganization is not motivated by the financial crisis but a strong desire to improve accountability and, with that, performance, Putnam Investments Chief Executive Officer Robert Reynolds announced the firm is doing away with team-managed equity mutual funds. Instead, those funds will be run by single portfolio managers.
In the process, 12 fund managers were let go last week, along with 17 quantitative research people and 18 others, for a total of 47 people dismissed.
Only the managers who perform in the top quartile of their peers will receive their full bonus. Those who perform better than 50% of their peers will receive only half of their bonus, and those who do worse than that will receive lower compensation and maybe even lose their jobs. The goal is to "reward top-flight results" and deliver "excellent, long-term, sustained top-quartile investment performance for shareholders," Reynolds said.
Along with this, Putnam hopes to take advantage of the extraordinarily talented people now in the job market because of the market decline and is "actively seeking proven talent in the marketplace, fostering individual managers" authority," Reynolds said. "I have always believed that success in asset management depends on fundamental research, individual manager responsibility and accountability, retaining and attracting the best people, and rewarding those who deliver sustained, superior results."
Putnam is also merging six funds into larger ones, merging the U.S. and non-U.S. research teams and planning to roll out 10 new absolute-return and global sector funds in January.
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