Putnam Investments is planning to cut the fees on many of its funds and tie the fees to the performance of a number of its funds, the company announced Tuesday.
Effective Aug. 1, fees on fixed income funds will be reduced between 13% and 34%, and on asset-allocation funds by an average of 10%. The wrap management fees will be eliminated on the firm’s target-date funds, called the Putnam RetirementReady Funds.
Equity funds will have performance fees reflecting the strength or weakness of the each fund’s returns. Putnam already have performance fees tied to its Absolute Return and Spectrum fund families.
In addition, as a fund family grows in size, Putnam will give discounts.
“Every element of our repricing plan is crafted to benefit our shareholders,” said Putnam President and CEO Robert L. Reynolds.
“There’s a pure and simple logic to performance fees,” Reynolds continued. “If a fund performs well, shareholders pay a higher management fee, which they will be very content to do if results are strong. Conversely, if a fund underperforms, the management fee charged to shareholders will be lower.”
Although there appears to be a pricing war among index fund providers, analysts don't expect wholesale fee cuts in the mutual fund industry.