Putnam Investments said Tuesday it is cutting fees for its fixed-income mutual funds by an average 13 percent, and by 10 percent for asset allocation funds holding a mix of stocks and bonds.
The Boston-based company also is changing pricing for certain funds to link fees to the funds’ performance. And Putnam plans to restructure fees so they either increase or decrease based on changes in total assets across all of Putnam’s retail funds for individual investors. Currently, fees for an individual fund are based solely on shifts in that fund’s assets.
Putnam President and Chief Executive Officer Robert Reynolds said the moves are “crafted to benefit our shareholders in some cases immediately, in all cases over the long haul.”
Beginning Saturday, expense ratios ? the ongoing charges that investors pay, expressed as a percentage of assets ? at fixed-income funds will decline an average of 13 percent from the current 0.55 percent to less than 0.49 percent.
Asset allocation funds’ fees will fall from the current average of about 0.63 percent to 0.57 percent.
Putnam will also eliminate a “wrap” fee for managing its RetirementReady funds ? a group of target-date funds that shift to more conservative investments as investors’ retirement target dates approach.
Those funds invest in a range of Putnam funds, with the overall fee based on expenses within those underlying funds, plus the additional fee for the managing the RetirementReady fund itself. That wrap fee of 0.05 percent is being eliminated.
The expense reductions don’t apply to Putnam’s retail stock funds, which the company sees as priced more competitively than its fixed-income and asset allocation products.
The shift to performance-based fees, which is subject to approval of new management contracts that will be submitted for shareholder approval, applies to Putnam’s U.S. growth, international and global equity funds. Fees for those funds will decline from the standard fee if the funds fall short of their performance benchmarks, or rise if the funds outperform.
The final change, expected to be adopted in January following a shareholder vote, involves funds’ “breakpoints.” That’s the industry term for asset thresholds that can either raise or lower the costs investors pay, depending on whether a fund’s assets rise or fall. When companies are managing more money, they’re more efficient and can lower costs.
Breakpoints are triggered at most fund companies based on shifts in assets within an individual fund. If shareholders approve the change at Putnam, breakpoints will be triggered based on combined assets across all retail funds Putnam manages. That means a gain in assets at one or more hot-selling funds could benefit all Putnam funds by triggering a broad fee reduction, or, conversely, one or a handful of funds that are faring poorly could boost expenses for the whole group.
The changes are among a series of steps Reynolds has taken since taking over a year ago at Putnam, a unit of Canadian financial-services conglomerate Power Financial Corp. Putnam is the nation’s 26th largest mutual fund company down from a No. 4 ranking at the end of 1998, according to Financial Research Corp. Putnam has some $103 billion in assets under management, including $55 billion in mutual funds.
Copyright 2009 The Associated Press.
