PUTNAM INVESTMENTS

Group 9 Presentation

Rajeev Kumar 09FN –

Santosh Kumar

Pushkar Singh 09FN –

Prabal Pratap Singh 09FN-076

Rajani Singh 09 FN-087

Varun Dhupar 09FN-114

History1924 Birth of Mutual Fund Industry

1937 Putnam Investment was born as “The George Putnam Fund of Boston”

1969 Expanded into institutional management by offering investment advisory services

1970 Was acquired by Marsh & McLennan Companies (MMC)

1983 Expanded globally

1986 Lawrence Lasser was appointed the CEO of Putnam

1992 Started offering investment advisory and plan administration services plans as “401(k) plans”

Mid-90’s Started focusing on Technology stocks and contributed 1/3rd of MMC profit

2001 Bursting of internet bubble resulting in major losses and underperformance of Putnam funds

Oct 2002 Ed Halderman appointed as co head investment to turn around the company

Market Timing

The strategy of making buy or sell decisions of financial assets by attempting to predict future market price movements.

Market timing is most common in international funds.

Unethical as allows sophisticated investors to skim profits off funds at the expense of less sophisticated long term investors.

Late trading is different from market timing as it allows to purchase mutual fund shares after market close but at the closing price.

Market Timing Practice, The Culprit Six portfolio managers made market timing

trade in funds through their account yielding profit of $700,000.

Securities fraud was associated with Putnam.

$4 billion was withdrawn from Putnam. The pressure made Lasser to resign and

Haldeman took charge.

How to put scandal behind Fast settlement of charges against

Putnam by regulators. Paid civil fines, losses to shareholders &

holding investments by managers before selling: at least 90 days.

Employees were guaranteed bonuses for 2003 at the 2002 level.

Marathon series of trips to visit all the major clients & brokers.

Culture change Hierarchy Individual

achievement Short term outlook Tight control Differentiation

between senior executives and other employees

Delegation Team work Long term

investment outlook Congenial More egalitarian

culture

contd No proper upward

communication channel

Unethical practices

Upward communication allowed through meetings and hotlines

Personal Integrity and customer focused approach

Organization & Processes

Organization & Processes Governance –

Partners group of 35-40 senior executives was replaced by advisory council made from deputies from all areas of the firm.

Legal –General Counsel(GC) was made by an outsider and made to directly report CEO, Haldeman who was also a member of the executive committee.

Compliance – A long standing legal officer was made Chief compliance Officer to oversee investment compliance, Contract & control, regulatory compliance, operational compliance & two firms for ethics and international compliance.

Organization & Processes Human Resources -

Fewer task forces, formerly drawn on time and attention of investment managers. External management consultants running the task forces were eliminated.

Investment -Product –or-portfolio-oriented approach was used, with 12 portfolio teams each headed by chief investment officer. Professionals were abode by common investment principles.

Bonus Structure - A new transparent bonus process replaced the traditional mysterious bonus process.

401(K) Plan: Trust Open communication with new investors

Removing miscommunications b/w Investment Managers and Sales Force

Leveraging Money-market funds

1999 2000 2001 2002 200310

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1 Year 3 Year 5 Year

Voyager Fund: Performance

Low risk Leveraging integrated quantitative and functional

research team Restricted selling by Sales force Controlled cash inflow and outflow

Thank You !!!