Putnam chief says firm to offer hedge funds soon

Putnam Investments, a Boston mutual fund company, plans to offer hedge fund portfolios in the next six to 12 months, chief executive officer Robert Reynolds said.

"It is a business we would like to get into," Reynolds told a conference at Boston College. "Over the next 6 to 12 months, you will see something from us."

Putnam's decision comes at a time many mutual fund firms are struggling to attract new investors after their assets shriveled during the financial crisis. Traditionally, mutual funds and hedge funds have been separate because mutual funds are closely regulated, while hedge funds are currently only loosely regulated.

Hedge funds attracted wealthy investors, pension funds, and endowments by promising to deliver better returns than mutual funds through techniques such as selling stocks short and using borrowed money, or leverage.

Running a hedge fund can be very lucrative for managers because these portfolios can charge both management and performance fees, while most mutual funds charge only management fees.

Putnam invests $102 billion and is a unit of Canadian insurer Great-West Lifeco Inc.

The $1.3 trillion hedge fund industry posted its worst returns ever last year, when the average fund lost about 19 percent. Mutual funds lost about twice that, industry data from Hedge Fund Research and Lipper Inc. show.

Pension fund investors expect to put fresh money into hedge funds at the end of this year, suggesting demand will revive after it sagged late last year, when investors pulled a record $150 billion out in the fourth quarter. (Reuters)