Boston Investment Chief Struggles To Make A ComebackPlay
The economic crisis has hit all financial firms hard, but for Boston-based Putnam Investments, trouble started even before the meltdown.
In 2001, the mutual fund company was the fourth-largest manager of stock and bond funds in the United States, according to the Financial Research Corporation in Boston. By 2003, Putnam had fallen from the top-five list, and just a few months ago, the company was not even among the top 25.
But despite its problems, Boston-based Putnam Investments is looking to grow. The firm wants to add new funds and reorganize parts of the company to return it to its former prominence.
To hear about Putnam's plans, and to find out how it is faring during the economic recession, WBUR spoke with Putnam's president and CEO, Robert Reynolds. The conversation is part of an ongoing series of conversations with local business leaders.
What challenges are investment professionals facing in the rocky economy?
PUTNAM CEO BOB REYNOLDS: Any time you have this type of market downturn, to me, the interesting thing is that everyone's dealt the same hand. So it becomes an opportunity set for firms to develop new products, make their existing products better and create a new opportunity set that wasn't there before.
What's the most common questions, what's the most common concern, that you're fielding from Putnam customers these days?
REYNOLDS: The biggest question we get today is, "What should we do now?"
Do you think you'll ever get back the value that you lost in the market before you retire — if you retire at 65 or even if you retire at 70? And if you retire at 55, will you get back that value?
REYNOLDS: That's a very difficult queston to answer because everyone's invested in a different way. When you hit whatever your projected retirement age is, that's not the end of everything. And what you try to do is structure portfolios that last another 20 to 25 years.
So there is an opportunity — depending upon how a person is invested, how much they've saved and what their spending patterns are — to make this money back.
Are there advantages, are there opportunities, in this market right now for investors, given the declines?
REYNOLDS: The opportunity on the upside is much greater than any further downside activities, so I think it's always a question of when to go back in. And the fixed-income market's presented itself with unbelievable opportunities that we've never seen before.
So, you see bond returns this year -- year-to-date -- greater than 10 percent. So it's an unprecedented type return.
Is it difficult to make that case to investors who are probably very skeptical today after getting burnt so badly over the last few months?
REYNOLDS: It always is. I mean, once you go through a downturn, the hardest thing to do is to get back in. But, the greatest movement in the market upwards is usually right after a downturn, and a lot of people miss that.
I think it's interesting that this year, in 2009, the first two months were the two worst months in the market in its history, yet the next six weeks have been the best six weeks ever in the market. So, it's that type of volatility that is very, very hard to project, but there are opportunities that we haven't seen in our business life.
Have a lot of people missed the opportunity of the last few weeks, with the snap up in the market?
REYNOLDS: There's no question that a lot of people missed that movement. In fact, if you look at the month of February, it was one of the greatest outflows of equity funds in the mutual fund industry.
What does this say about the state of the economy in both the near- and the long-term? Because there's a lot of mixed opinion about this. There are a lot of people out there, a lot of analysts out there, who say that they think we're at the bottom and that we might actually be moving up. There are other economists who say it could yet be a year, or two or five.
REYNOLDS: The real answer is, no one knows. The market's always nine months ahead of the economy. So, you can see signs from the market that the economy's going to be in much better shape nine or twelve months from now than it is today. So, we'll have to wait and see.
In February, Putnam laid off 10 percent of its staff — 260 people -- one of the largest job cuts, by percentage, in the state. The cuts were cited as a way to make Putnam more efficient. Does that suggest the economy has pushed you along in exactly the same way we would presume you would hope to see in other companies in which you make investments? You know, realistic approach to the bottom line today?
REYNOLDS: I think for us it was an opportunity to redeploy resources where we pulled back in areas that you do not have the volumes in. At the same time, we've been investing heavily on the investment side of our business. It's in preparation for where the market's going.
Putnam has suffered through big outflows in the market. You once managed $400 billion in funds, it's down to about $100 billion. What's ahead for Putnam?
REYNOLDS: We would like to be one of the top five mutual fund firms in the world. This is a new Putnam, not the same Putnam that's been around for the last eight years. And we want people to know we're making changes. I think this all comes down to results.
What's that mean for Putnam in Boston? Do you continue to see Putnam as a vibrant player in Boston, and a big employer?
REYNOLDS: Yeah, we definitely are a Boston player. All our major business activities take place in either Boston proper or in the Boston area, and I see that continuing.
This program aired on May 5, 2009.