Putnam Investments' layoffs last week of 256 employees - its second round in less than a month - signal pessimism about the markets and may lead other fund companies to follow suit, analysts said.

In a memo circulated to employees Wednesday, president and chief executive officer Lawrence J. Lasser announced the new layoffs - equal to 4% of Putnam's work force - and said they were prompted by depressed equity markets.

"We have concluded that Putnam's size and expense levels should be brought closer to what they were before last year's growth spurt," the memo said.

If further cuts are necessary, the memo said, they will come through "normal attrition."

The Boston company cut a few dozen jobs late last month.

Michael Paisan, who covers Putnam's parent company, Marsh & McLennan Cos., for Keefe, Bruyette & Woods Inc. in New York, said the layoffs would let Putnam "regain some of the profit margin it lost" in the market's recent slide.

Putnam's stock, bond, and money fund assets fell 7.3% from yearend to Feb. 28, to $247.8 billion, according to Lipper Analytical Services.

Last week's layoffs included five portfolio managers. Fund companies rarely fire portfolio managers, and Putnam's doing so suggests that it is committed to maintaining profits, Mr. Paisan said.

Portfolio managers are generally the last to go at fund companies - and even then, they are cut very selectively, he said. "You don't want to cut a Peter Lynch-type superstar. You have to be selective about whom you lay off."

Still, Louis Harvey, president of Dalbar Financial Services, a Boston mutual fund consulting firm, said Putnam can probably live easily without the laid-off managers. For years Putnam has kept a "back-up stable" of portfolio managers as a buffer against staff turnover, and the layoffs probably came from that group, he said.

Also, since Putnam has a team-oriented investment staff instead of hyped "star" portfolio managers, the losses are not likely to hurt its public image, Mr. Harvey said.

A Putnam spokesman said that he did now know which managers had been laid off.

Geoff Bobroff, a Rhode Island mutual fund consultant, said the cuts suggest that Putnam now expects a longer period of sluggish growth.

"Everybody hoped that by the end of the first quarter things would rebound," he said.

The new round of layoffs is the largest in the company's history. Virtually all of those cut, except for the five portfolio managers, came from the operations and administration divisions, the company said.

Janus International of Denver announced in early February that it had fired 468 operations officers. Also this year, T. Rowe Price Associates Inc. of Baltimore said that to cut costs it would not renew any of its consulting contracts and American Express Financial Advisors of Minneapolis said it was reviewing costs.

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