When a 51-year-old mutual fund executive retires, industry observers are curious.
When a 51-year-old executive retires from Putnam Investments, a money manager that has spent the past several years suffering through poor performance, fund scandals, and outflows, industry observers are suspicious.
Putnam Investments announced Friday that Richard A. Monaghan, the head of its fund sales, will retire at the end of September. Mr. Monaghan, 51, will be succeeded by William T. Connolly, who is the national sales director.
Mr. Monaghan, who has worked for Putnam for seven years after 13 years at Merrill Lynch & Co., said Friday that it was a decision he had considered for some time.
“It is interesting. I turned 51 yesterday and the permitted retirement age at Putnam is 50,” Mr. Monaghan said. “This decision really had nothing to do with Putnam. … This was my decision. It was my time to sit back and reflect a little on my own personal circumstances.” Though he is retiring from Putnam, he said, “this won’t be my last job.”
Mr. Monaghan added, “I have found that after everything that we have been through at Putnam in the last two years, my feeling is that Putnam is still well-positioned. This isn’t something I’d consider a work in progress. Putnam is in full-scale turnaround mode.”
Industry observers were skeptical, however. Putnam, a unit of Marsh & McLennan Cos., has suffered through a tumultuous period of outflows and senior management turnover since Ed Haldeman was named chief executive officer in November 2003. He succeeded Lawrence J. Lasser who took the blame for Putnam’s becoming, that October, the first mutual fund company charged in the trading scandals.
Putnam had $263 billion of mutual fund assets at Dec. 31, 2003, but steady outflows reduced the total to $196 billion by this July 31.
Financial Research Corp., a Boston company that tracks mutual fund flows, said Putnam had $27.1 billion of outflows from its equity and bond funds in 2003, lost another $28.89 billion in 2004, and $10.13 billion this year through June 30. And the estimated outflow in July was $1.95 billion, the research company said, up $72 million from June but nearly $200 million less than in July 2004.
“When we look at the net numbers, Putnam is still in the doghouse when it comes to sales,” said Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I. “Their ability to attract assets continues to be impaired.”
As assets flow out of Putnam, so do senior executives. Since Mr. Haldeman was promoted, half of the company’s 50 highest-paid executives have left, and he has installed the chief compliance officer, general counsel, chief financial officer, chief administrative officer, and head of operations.
“Certainly it is not uncommon in situations like this where a firm is really trying to make radical positive changes that personnel changes are part of that equation,” said Paul Werlin, the president of Human Capital Resources Inc., a St. Petersburg, Fla., analytical firm.
Mr. Bobroff said Mr. Monaghan’s departure may be the latest step in Mr. Haldeman’s program to transform Putnam. “Mr. Haldeman believes that he has fixed the investment side, but outflows have continued. Now he has to get sales jump-started,” Mr. Bobroff said.
“The timing of [Mr. Monaghan’s] retirement … is entirely coincidental,” Mr. Haldeman said in a statement Monday, it was “driven by individual circumstances and shouldn’t be lumped together” with other recent retirements of executives in their 50’s.
Putnam’s fund flows will take time to turn positive, he said, but he is confident that it will happen eventually. “The flows are not where we want them to be,” he said, but this isn’t as important as “doing a good job taking care of existing clients’ money.”
Mr. Bobroff agreed — up to a point — with what has been Mr. Haldeman’s longtime position.
“The thing that cures these problems is time,” he said. “I am not saying that Ed is running out of time, but time is something that he doesn’t have a lot of. … The landscape of distribution is changing, and Putnam has to change with it.”
Mr. Monaghan is the third executive this year to retire in his 50’s. In June, Putnam announced that John F. Boneparth, 56, the head of its global institutional management business, would retire at the end of September. In February, Steve Oristaglio, 50, announced plans to retire as head of investments.
Mr. Haldeman said in the statement that the “only common denominator” is that that all three executives built “strong, deep, and stable sales and marketing organizations, which are poised to grow again.” As a result, he added, “we are well-positioned to begin growing again, especially given the improvements in investment performance.”
Mr. Monaghan said he is confident that Putnam is in good hands. Mr. Connolly, who was hired by Mr. Monaghan from Merrill in 1999, will oversee sales and marketing in all of Putnam’s retail business.
“To be honest, I thought this was just an opportune time to retire,” he said. “I was hitting 51 and heading into my vacation. As an organization, we have always had a back-to-school mentality. We want to hit the ground running after the summer. I think this is a good chance for me to take a step back and reflect and give these guys a chance to earn the success.”
Mr. Monaghan said it has been difficult working at Putnam the past several years.
“We face a lot of morale issues in the organization,” he said. “I feel good that we were able to keep our wholesaling force intact and have been able to successfully add new talent. I feel good about what we have done with regard to retention of people and retention of assets. One could make the point that asset levels have gone down, but the number of clients and assets we have retained has been remarkable.”
He added, “At Putnam redemption rates are at the industry average, and they have been there since the middle of 2004. We have regained our performance and regained the trust of advisers and clients. Now, we can get the focus back on the investor.”
