Digging out of the hole

The mutual fund business is chock full of products and managers who need a story just like that. No Boston fund company is so desperate for a comeback as Putnam Investments and the new managers it hired to deliver exactly that.

Putnam’s largest, most important stock mutual funds have been infamous for appallingly bad investment performance in recent years. The 2009 experience has been comparatively brief, but dramatically better.

Funds like Voyager and the Putnam Fund for Growth and Income are above-average performers this year and, in some cases, near the very top of their classes.

Now the catch: The world is full of products you can fairly judge over a period of six months, but mutual funds don’t qualify. Fund reputations are earned over years, not 26 weeks.

Even Bob Reynolds, the salesman extraordinaire in charge at Putnam for almost a year now, counsels caution. “I would be the first to say it’s only been six months,’’ he says. “Our job is to perform well over a long period of time.’’

But those funds have enjoyed an impressive start and it’s been a long time since Putnam, once Boston’s second-most-important investment company, has had anything to crow about. I call it a start because the Putnam funds are run by new managers operating under a new system and getting paid in a new way. And the strong results of the first six months of 2009 are beginning to have an impact on records that really do matter - performance over three and five years.

Consider the $2.8 billion Voyager, a growth-oriented fund that owns large stocks. Once Putnam’s flagship fund, Voyager had lost more than half of its value over the first eight years of this decade.

The fund, assigned to new manager Nick Thakore in November, lost a little less than competing funds in the dismal second half of 2008. This year, Voyager had earned a booming 27.4 percent return through last week, securing a spot among the top 1 percent of large-stock growth funds. The Standard & Poor’s 500 gained 3.1 percent in the same period. Nothing in the Voyager portfolio suggests Thakore is swinging for the fences. Stocks like Apple, Microsoft, and CVS Caremark are among its largest holdings.

Now look at Putnam’s Fund for Growth and Income, the company’s largest, with $4.8 billion under management - and a stinker for much of this decade. The fund, which manager Robert Ewing took over in November, is solidly among the top quarter of its value-oriented competition this year, with a gain of about 5 percent.

Thakore and Ewing are among a crowd of former Fidelity Investments executives recruited by Reynolds to fill key Putnam positions. Like other Putnam managers, they are stock pickers expected to pick stocks. Quantitative analysis, emphasizing mathematical measures of stocks and the market, is less important at Putnam today.

Reynolds has also changed the way Putnam managers are paid. Bonuses depend a great deal on performance over a rolling three-year period. Managers with below-average returns won’t get a bonus at all.

Putnam’s strong first half of 2009 extends beyond the returns of just two funds, but the best performers have tended to be among managers who invest in large-company stocks. Jonathan Rahbar, a Morningstar analyst who follows Putnam, notes performance has been weaker among funds that own shares of mid-size and smaller companies.

But Rahbar agrees performance of many important Putnam funds has been impressive this year. “The six-month time horizon is rather short, but fund performance is off to a good start,’’ he says.

Putnam is trying to dig out of a deep hole and still has lots of work to do. But the early results of 2009 deserve some attention.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.