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At Putnam, Writing Was on the Wall

Putnam Investments, rattled by subpar performance, earlier this week announced a broad restructuring that will include the ouster of a dozen fund managers and elimination, by merger, of six equity mutual funds.

In recent months, Putnam has managed to qualify only one of its equity funds in the "A" category of grades computed by Ratings. The company's 41 funds are summarized in an accompanying table showing their breakdown by percentages in the various grade categories since December 2007.

The portion of Putnam equity funds in the "D" and "E" ranges, which equate with "sell" recommendations, has fluctuated between 39% and 63%, as can be seen in a second table.

Putnam's once-pristine reputation was tarnished by depressing fund performance during the 2000-02 bear market and then dragged through the mud when the firm got caught up in the market-timing scandal shortly afterward.

Another adjoining summary table of recent performances of the Boston firm's equity funds explains why Putnam is struggling to rejuvenate its image. Only nine of its 41 equity funds have managed to outperform the S&P 500 total return index over the three months ended Oct. 31. Two offerings imploded more than 40%.

For the past year, only 11 of its funds managed to outperform the S&P 500. Two crumbled more than 50%, while 16 others sank more than 40%.

The subpar performance has been happening for more than just the past year. Six Putnam equity funds have fallen more than an annualized 10% rate over three years, a period when only nine of the firm's 41 equity funds outperformed the S&P 500.
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