Oct. 31–Washington and Oregon are considering whether to pull more than $1 billion out of Putnam Investments after the fund manager was sued by regulators this week amid a widening probe of impropertrading within the $7 trillion mutual-fund industry.<\/p>\n
State investment officials said they’re seeking meetings with Putnam to clarify whether employee retirement funds placed with the company were harmed by alleged rapid-fire trading and insider dealing by employees of Putnam, the nation’s fifth-largest mutual-fund company.<\/p>\n
Washington has $556 million invested in foreign stocks through Putnam, out of $39 billion in state pension-fund assets. Oregon has $500 million in similar investments out of $37 billion.<\/p>\n
“This is a large amount of money and it’s a very significant relationship,” said Joseph Dear, executive director of the Washington State Investment Board.<\/p>\n
“We are intensely concerned about the entire issue of investment fund integrity in the fund-management industry,” he added. “For any manager implicated, we want answers about what, why and what they’re going to do about it.”<\/p>\n
State and federal regulators sued Putnam Tuesday, alleging it allowed big investors to quickly buy and sell shares to profit from price lags on overseas shares in violation of stated policy. Regulators also say two former Putnam fund managers improperly traded shares in Putnam funds for their own enrichment.<\/p>\n
Oregon said one of those managers, Omid Kamshad, recently was dismissed from the state’s portfolio.<\/p>\n
“We might in the end very well conclude to terminate” the investment, said Todd Jones, a spokesman for Oregon state treasury. “But we wouldn’t do so without meeting first with Putnam and we haven’t scheduled a meeting.”<\/p>\n
Dear said Washington’s funds were managed separately from other pools of money, suggesting there was less chance state money was mishandled.<\/p>\n
Kamshad and Justin Scott, the other fund manager named in the suit, supervised foreign stock investments, where investors can profit from short-term trading. A stock that closed lower in Tokyo, for example, might soar on news released later in the global day. Quick buying and selling can capture those gains.<\/p>\n
“Our concern is integrity,” Dear said. “Were any of the individuals associated with our assets implicated in the allegations that have been made about market timing? Ultimately, the board could terminate the contract.”<\/p>\n
Massachusetts, which joined in the investigation of mutual-fund fraud, has said it will withdraw $1.7 billion it had placed with Putnam, a Boston-based subsidiary of insurer Marsh & McLennan.<\/p>\n
Putnam reportedly has denied that it defrauded investors, though it has said it failed to stop some improper trading.<\/p>\n
The charges against Putnam are the first in a widening inquiry that began last month with a New York State complaint against a hedge fund. Since then 80 mutual-fund companies reportedly have received subpoenas.<\/p>\n
Yesterday, Putnam said it had received a subpoena from the U.S. Attorney in Manhattan seeking documents related to trading in the shares of its mutual funds. Putnam said it was cooperating with the investigation.<\/p>\n
—–<\/p>\n
To see more of The Seattle Times, or to subscribe to the newspaper, go to http:\/\/www.seattletimes.com.<\/p>\n
(c) 2003, The Seattle Times. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n
MMC,<\/p>\n","protected":false},"excerpt":{"rendered":"
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