Putnam taps former Fidelity executive as CEO
Putnam Investments yesterday named Robert L. Reynolds its chief executive and president, hoping the former Fidelity Investments executive can remake the smaller Boston mutual fund firm into a tougher competitor for its cross-town rival.
Reynolds will start work July 1, a year after he left the second-in-command job at Fidelity after realizing he wouldn't soon get the chance to replace that firm's longtime chief executive, Edward C. "Ned" Johnson III.
Now Reynolds will go head-to-head with Johnson at Putnam, the 71-year-old firm that has shrunk dramatically after a series of scandals related to market timing. Reynolds, 56, will succeed Charles "Ed" Haldeman, who stabilized Putnam but failed to turn around its performance. Putnam's $175 billion in total assets under management is less than half the $370 billion it held at the end of 2000.
Haldeman, 59, will take on the new role of chairman of the mutual funds unit of Putnam, whose sale he helped arrange to Canada's Power Financial Corp. last year for $3.9 billion.
On a conference call with reporters yesterday morning, Reynolds cited Putnam's strengths in institutional investments and other areas. He plans to study various changes and to "take a hard look at research," an area some investment analysts blame for a poor run by some of Putnam's biggest mutual funds, which invested heavily in financial stocks last year.
"We realize what our clients' expectations are," Reynolds said. He added Putnam will likely introduce new products and mentioned he's a fan of funds such as asset-allocation funds that diversify their investments and funds that use short-selling to prosper when stock prices fall, and when they rise. Cost cutting "isn't on my agenda," Reynolds added. "No company has ever cut its way to success or greatness."
Other former Fidelity executives have risen to great heights under Johnson before joining other firms - notably Robert Pozen, once Fidelity's investment chief, who in 2004 joined MFS Investment Management as its nonexecutive chairman. But as a former Fidelity star now quarterbacking an opposing team, Reynolds may pose the sharpest chal lenge for Fidelity even though it dwarfs Putnam in size, with assets under management of $1.6 trillion.
The difference doesn't seem to faze Reynolds, however. Fidelity is "just one of the other players," he said on the conference call. "They have a dominant market share in the 401(k) business, but to me they're just someone else we have to compete against." Fidelity spokeswoman Anne Crowley said of Reynolds in his new role, "We wish him well."
Wenli Tan, who follows Putnam for Chicago fund research firm Morningstar Inc., called the Reynolds appointment "encouraging" since one of the biggest changes he made at Fidelity was to revamp its staff of stock analysts. Putnam, she said, is having troubles in the same area. For instance, it hasn't replaced John Coffey, a key financial industry analyst who left last year.
These weaknesses, in turn, have hurt fund performance, she said, especially in funds that held on to troubled financial stocks such as Countrywide Financial Corp. and Bear Stearns Cos. too long. Putnam's flagship Growth & Income fund, for instance, is down 12.8 percent this year, while the Standard & Poor's 500 index is down 7.9 percent.
"I think the immediate concern is really their research efforts. I think that's why a number of its equity funds have been suffering," Tan said.
Just where Reynolds would wind up has been a subject of keen interest in the investment industry, especially after he was a finalist to become commissioner of the National Football League in 2006. Yesterday, Reynolds said he was looking for the chance to run a business himself and decided to leave Fidelity just after his 55th birthday last year when Johnson, now 78, told him he planned to "continue doing what he was doing."
"Even though I was running Fidelity on a day-to-day basis, there's always Ned there," Reynolds said. "I just made the decision I'd like to do something where I could run things." Since leaving Fidelity he has been approached to run another mutual fund company outside of Boston and with various sports proposals, but decided to stay in the funds industry where he could grapple with issues like retirement planning. "In my heart of hearts I love this business and what it does and what it means," he said.
In May, Haldeman disclosed that Power Financial had extended his contract at least through 2010, which a spokeswoman said at the time would keep him in the roles of chief executive and president. Yesterday, Haldeman said that was the likely scenario at the time and it wasn't clear if Reynolds would join the company until this week.
Haldeman said his goal now is to support Reynolds. He acknowledged the problems during his tenure, but cited successes such as building flows in the company's institutional business. There were "a lot of difficult days, and a lot of things we can be proud of," he said. "Certainly not an A in all subjects, but pretty respectable," he said.
Ross Kerber can be reached at kerber@globe.com. 