With its $3.9 billion cash deal to acquire Putnam Investments, Power Financial Corp. gets the beachhead in U.S. asset management it has coveted, but also inherits the task of turning around a company that has been bleeding assets for years.

There is little expectation that fund outflows - with $192 billion of assets under management as of Dec. 31, Putnam is half the size it was in 2001 - will end soon. Executives at Putnam's parent, Marsh & McLennan Cos. Inc., and Power both say outflows are likely to continue at least through this year and into some if not all of 2008.

Given that outlook, analysts said the Montreal financial services company might consider steps to reinvigorate the operation, such as altering management or a new distribution strategy.

But Robert Gratton, Power Financial's chairman, said in an interview Thursday that his company has no plans to bring significant changes to Putnam's executive ranks, sales strategy, or anywhere else. Putnam's recovery, he said, is already under way.

"Flows are still negative and will be negative for all of 2007," he said. "But things are starting to change on the institutional side, where we expect positive flows from net sales. The timing of when we become positive - whether it is the end of 2007 or the beginning of 2008 - is really irrelevant. We are satisfied that the turnaround is there … fund performance is growing stronger."

Much would remain the same. Putnam is to remain in Boston and retain its brand, operations, personnel, and offices.

Mr. Gratton is not alone in the view that Putnam's recovery may already be under way. James Kennedy, T. Rowe Price's chief executive officer, said Thursday that Putnam's outflows have "been a great source of business for us for the last couple years, and we are very grateful for that. But they have worked hard to shore up their performance and they are becoming a tougher competitor for us again."

"Any uncertainty in a fund company's corporate structure is a cancer internally for investment operations," he said. "Putnam is doing a much better job. I have to hand it to them, Putnam is becoming more competitive again."

Putnam has had significant outflows in each of the past four years, but the numbers have slowed, albeit off a smaller base. Outflows were $28.89 billion in 2003 and $27.10 billion in 2004. In 2005 the number fell to $20.95 billion, and through November of last year the total was $15.77 billion, according to Financial Research Corp. (Putnam manages the 401(k) program for SourceMedia Inc., American Banker's parent.)

Power Financial, Canada's largest mutual fund company, owns majority stakes in Great-West Lifeco Inc. and IGM Financial Inc., the parent of the mutual fund companies Investors Group Inc. and Mackenzie Financial Corp.

Charles "Chip" Roame, an analyst with Tiburon Strategic Advisors in San Francisco, said Power is a well-capitalized company that is controlled by one family in Canada. The ownership of the company gives it the flexibility to be patient.

Patience was a luxury Marsh did not have. Michael G. Cherkasky, Marsh's president and CEO, said during a conference call Thursday that Putnam's "margin wasn't consistent with the industry; its flows have been negative before finally stabilizing. It was in a turnaround, but there was a substantial amount of risk as to whether that turnaround would continue."

The deal would give Power a recognized, though tainted, U.S. brand and may give Putnam a chance for a fresh start. Marsh, which is based in New York, has paid hundreds of millions of dollars to settle charges ranging from market-timing to bid-rigging in insurance brokerage.

That background led analysts to think that this particular deal could bring a much-needed sense of stability to Putnam.

Geoffrey Bobroff, an analyst with Bobroff Consulting in East Greenwich, R.I., said, Power is "committed to this business and committed to spending to grow this business in the U.S. Marsh isn't in the asset management business."

Indeed, Mr. Gratton said Power would look to continue acquiring in the United States. It has made two such acquisitions in the past year, buying businesses from MetLife and U.S. Bancorp, to develop its 401(k) retirement services business.

"On the 401(k) side there could be more deals, but in terms of buying another large mutual fund company, we are going to wait and see until this deal closes first," Mr. Gratton said. "We are going to look at other opportunities. I don't know if it will be something this size, but we are going to look." (The Putnam deal is expected to close in June.)

Clifford Gallant, an analyst with KBW Inc.'s Keefe, Bruyette, & Woods Inc., agreed that the deal would likely be a plus for Putnam.

"Putnam never fit strategically" within Marsh, he said. "Marsh had to focus on fixing their insurance brokerage operation."

Still, analysts tended to think that a bit more change might help. "Putnam is still an organization with nearly $200 billion of assets there, and it has a recognizable name," Mr. Gallant said. "There clearly is value here that needs to be unlocked with a better management team."

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