Connecticut’s state treasurer said yesterday that she squeezed $225,000 in discounts from Putnam Investments for her state’s pension fund as part of a deal to stay with the Hub money manager as itgrapples with the fallout from civil fraud charges.
An exodus of big clients went on from Putnam yesterday, as Walt Disney Co. pulled its 401(k) business from Putnam’s New Opportunities fund. A Putnam spokeswoman said the firm was disappointed.
That was just the latest blow to Putnam, which lost more than 11 percent of its assets under management since federal and state regulators hit it with civil fraud charges on Oct. 28 over improper “market-timing” trades.
Several mutual fund firms face such accusations, but Putnam was the first to face formal charges in the scandal.
Massachusetts Secretary of State William Galvin said his staff is probing other fund firms, as well as Putnam, and has sought help from other states’ regulators.
“It made sense for us to try to reach out to other states to try and seek their assistance,” Galvin said. “When somebody has a big fire going, you look to adjacent communities to provide assistance. And we have a big fire going.”
Connecticut Treasurer Denise Nappier kept Putnam as a fund manager for a nearly $290million piece of her state’s $19 billion pension fund – but not without extracting a price.
Nappier renegotiated fees with Putnam so that it waived all fees from August through Oct. 24, yielding $225,000 for Connecticut, a Nappier spokeswoman said. The deal also links Putnam’s pay to performance through March, and keeps it on a “watch list.”
“The ice under Putnam remains thin,” Nappier said in a statement. “And we will continue to carefully monitor every step they take.”
The charges against Putnam give pension funds leverage to negotiate lower fees. “They’re clearly in a bad bargaining position,” Morningstar analyst Matt Scholz said, expecting Putnam’s assets to erode by 30 percent from the Oct. 31 $277 billion total.
In other developments yesterday, Nicole McDermott, a former executive at Security Trust Co. in Phoenix, Ariz., pleaded guilty to securities fraud in the Canary hedge fund case in New York.
In Chicago, Bank One Corp. said it had dismissed two fund group executives and reassigned a group lawyer amid an internal probe into improper fund trading practices.
Herald wire services contributed to this report.
