Calpers pulls $1.2b in assets out of Putnam

The move by the nation's largest retirement fund to fire the embattled Boston fund company came amid a report that Putnam assets under management continued to shrink last week.

In a filing with the Securities and Exchange Commission, Putnam's parent, Marsh & McLennan Cos. of New York, said assets under management at Putnam fell to $256 billion from $263 billion in the week ended Friday, a drop of 2.7 percent.

The sharpest decline has been in assets managed for institutional clients, like the retirement systems, which fell 4.3 percent in the week. With yesterday's vote, Calpers became the 10th public pension fund to fire Putnam. Since the end of October, when the firm had $277 billion, assets under management have declined by nearly 7.6 percent.

Haldeman, who was appointed by Marsh & McLennan Nov. 3, and several other Putnam officials spent an hour and a half making the firm's case to the Calpers trustees, who held a regular monthly meeting in San Diego. But in a closed executive session, the group voted yesterday afternoon to fire Putnam as manager of a US stock portfolio worth $603 million and an international stock portfolio worth $618 million, according to Brad Pacheco, a spokesman for the retirement system.

"The main reasons for the vote against Putnam were the lack of ethics, internal controls, and compliance," said Pacheco.

Calpers is the largest US retirement fund, with $155 billion in assets. Separately, trustees for the California teachers' retirement system are expected to consider whether to retain Putnam, which manages about $332 million for that fund.

Phil Angelides, treasurer of California, said he asked the two state retirement funds to dump Putnam "because the company failed to meet the standards that we, as fiduciaries, should expect from a firm handling more than $1 billion on behalf of California pensioners and taxpayers." In a statement, he added, "Today's vote sends a strong signal to the marketplace that there will be serious and immediate consequences and penalties to violating the trust we hold with investors and pensioners."

California joins public pension funds in Massachusetts, New York, Vermont, Pennsylvania, Rhode Island, and Iowa and other states that have already fired Putnam.

A Putnam spokeswoman could not be reached to comment. Putnam has been battered since the SEC and Massachusetts Secretary of State William F. Galvin each filed charges against the fund company for market timing. Both charged the nation's fifth-largest fund company with allowing or condoning rapid-fire trades in an out of funds, in violation of securities laws.

Last week, the SEC reached a partial settlement with Putnam. Without admitting or denying guilt, Putnam agreed to a series of changes including improved oversight of trading by investment managers and other insiders. But some of the steps in the settlement -- requiring three-quarters of the trustees to be independent, including the chairman -- had already been implemented at Putnam.

That led to criticism of the SEC by Galvin and others, who charged the agency with rushing through a settlement and going easy on Putnam.

SEC officials have argued a quick settlement was necessary to avoid hurting Putnam shareholders.

Jeffrey Krasner can be reached at krasner@globe.com, and Andrew Caffrey can be reached at caffrey@globe.com.