By Muralikumar Anantharaman
BOSTON (Reuters) - U.S. asset manager Putnam Investments fired 47 workers on Monday, including 12 portfolio managers, and said it was merging six stock funds following a dramatic decline in assets during the financial crisis.
The job cuts affect nearly 2 percent of Putnam's workforce and mark the biggest changes at the Boston-based unit of Canadian insurer Great-West Lifeco Inc
Putnam, Fidelity and other asset managers are scrambling to cut jobs as investors pull record amounts of money from stock mutual funds during the financial crisis. The industry generates the bulk of its revenue from fees based on a percentage of assets under management.
Putnam has been squeezed especially hard as its top stock funds underperform the market. Its assets are down 38 percent this year, falling to $116 billion at the end of October from $186 billion in February and $371 billion in 2000.
Reynolds told reporters on a conference call that all 47 job cuts are taking place in Putnam's investments group. The quantitative research team, for example, will shrink to nine people from 26, he said.
Putnam is also changing the way it manages money by shifting from a team-based approach in stock funds to giving individual managers full responsibility. Compensation is being more closely aligned with performance, Putnam said.
Since Reynolds' appointment, the firm has hired new portfolio managers for its leading funds and recruited research analysts.
"The latest round of news is encouraging, but we need to see more from Putnam," said Wenli Tan, an analyst at mutual fund research group Morningstar Inc. "I wouldn't consider Putnam to be in the clear yet."
Tan said investors have withdrawn $12.6 billion from Putnam's traditional open-ended funds in 2008. Its largest funds -- the Fund for Growth and Income, and the Voyager -- are Putnam's worst-selling funds, she added.
Putnam's funds were the worst-performers in 2007 among 67 major fund families in a February survey by fund research group Lipper Inc for the publication Barron's.
Under the restructuring announced on Monday, the Fund for Growth and Income will take over the Classic Equity Fund, the Discovery Growth Fund will be merged into the New Opportunities Fund and the Investors Fund will acquire the Capital Appreciation Fund and the Tax Smart Equity Fund.
The Equity Income Fund will take over the New Value Fund and the Vista Fund will acquire OTC & Emerging Growth Fund.
The job cuts follow the three worst months on record for stock funds, according to TrimTabs Investment Research. Investors withdrew a total $144 billion from equity mutual funds in August, September and October.
While more than 130,000 jobs already have disappeared at banks, brokers and other financial firms since mid-2007, asset managers have held up better because they do not commit their own capital. They generate the bulk of revenue from fee income based on a percentage of assets under management.
Reynolds, a former chief operating officer at Fidelity, said the job cuts and other changes were not driven by market conditions and instead reflected a reorganization in the way Putnam manages money.
"These are changes that we would make whether markets are rising or falling," he said.
Reynolds said Putnam was still hiring investment talent and would interview four or five analysts for jobs this week. He said the firm would introduce to the market in 2009 new absolute-return funds, as well as sector-focused global funds that will be managed by analysts.
(Editing by Jason Szep; Editing by Andre Grenon)
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