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 TheSteet.com 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.

Of all the firm's equity funds, only the Putnam Utilities Growth & Income Fund ( PUGIX), with an anemic 0.87% growth rate, has managed a positive annual rate of return over the past three years.

The firm announced that, in the next month or two, the Putnam Capital Appreciation Fund ( PCAPX) and the Putnam Tax Smart Equity Fund ( PVISX) will be merged into the Putnam Investors Fund ( PINVX). The Putnam Classic Equity Fund ( PXGIX) will meld with The Putnam Fund for Growth and Income ( PGRWX), while the Putnam Discovery Growth Fund ( PVIIX) will combine with the Putnam New Opportunities Fund ( PNOPX). The Putnam New Value Fund ( PANVX) will be acquired by the Putnam Equity Income Fund ( PEYAX), and the Putnam OTC Emerging Growth Fund ( POEGX) will combine with the Putnam Vista Fund ( PVISX).

PERCENTAGE OF PUTNAM EQUITY FUNDS WITH TheStreet.com RATINGS BUY, HOLD & SELL RECOMMENDATIONS
BUY (%)
HOLD (%)
SELL (%)
Dec. '07
9.8
41.5
48.8
Jan. '08
7.3
46.3
46.3
Feb. '08
9.8
43.9
46.3
Mar '08
7.3
43.9
48.8
Apr '08
12.2
39.0
48.8
May '08
12.2
41.5
46.3
Jun '08
9.8
51.2
39.0
Jul '08
7.3
48.8
43.9
Aug '08
4.9
31.7
63.4
Sep '08
9.8
31.7
58.5
Oct '08
17.1
34.1
48.8
Data as of 10/31/2008.Source: TheStreet.com Ratings.

For an explanation of our ratings, click here.

NOT MAKING THE GRADES AT PUTNAM EQUITY FUNDS
Percentage of Putnam Equity Funds in Each of the TheSteet.com Ratings Grade Ranges
Grade Range
A
B
C
D
E
Dec. '07
2.4
7.3
41.5
31.7
17.1
Jan. '08
2.4
4.9
46.3
29.3
17.1
Feb. '08
2.4
7.3
43.9
29.3
17.1
Mar '08
2.4
4.9
43.9
26.8
22.0
Apr '08
2.4
9.8
39.0
24.4
24.4
May '08
2.4
9.8
41.5
19.5
26.8
Jun '08
2.4
7.3
51.2
19.5
19.5
Jul '08
2.4
4.9
48.8
22.0
22.0
Aug '08
2.4
2.4
31.7
43.9
19.5
Sep '08
0.0
9.8
31.7
36.6
22.0
Oct '08
2.4
14.6
34.1
41.5
7.3
Source: TheStreet.com Ratings - Data as of 10/31/2008
For an explanation of our ratings, click here.

PUTNAM EQUITY FUNDS: IN NEED OF A TRANSFUSION
NAME, TICKER & TheStreet.com RATINGS GRADE INVESTMENT OBJECTIVE TOTAL EXPENSE RATIO (%) 3-MO. TOTAL RET'N (%) 12-MO. TOTAL RET'N (%) 3-YR. ANN'L RET'N (%)
Putnam Asset Alloc-Balanced A (PABAX) C+ Asset Allocation - Domestic 1.11 -22.65 -31.94 -5.55
Putnam Asset Alloc-Conserv A (PACAX) A- Asset Allocation - Domestic 1.21 -16.60 -22.09 -3.51
Putnam Asset Alloc-Growth A (PAEAX) C Asset Allocation - Domestic 1.23 -26.68 -38.30 -5.91
Putnam Capital Appreciation A (PCAPX) D+ * Growth - Domestic 1.34 -23.78 -39.26 -10.07
Putnam Capital Opportunities A (PCOAX) D Small Cap 1.23 -26.12 -37.77 -8.83
Putnam Classic Equity A (PXGIX) C * Growth & Income 1.25 -16.08 -36.30 -8.35
Putnam Convertible Inc & Gr A (PCONX) C- Convertible 1.05 -32.14 -39.13 -7.30
Putnam Discovery Growth Fund A (PVIIX) D+ * Aggressive Growth 1.57 -29.58 -40.92 -7.65
Putnam Equity Income A (PEYAX) B- Equity Income 1.05 -20.46 -32.24 -2.97
Putnam Europe Equity A (PEUGX) D- Non-US Equity 1.48 -36.45 -49.62 -6.22
Putnam Fund for Gr & Inc A (PGRWX) D Growth & Income 0.92 -21.28 -40.22 -9.76
Putnam George Fund A (PGEOX) C Asset Allocation - Domestic 0.98 -23.30 -34.59 -7.42
Putnam Global Equity Fd A (PEQUX) D- Global Equity 1.28 -33.97 -48.72 -7.67
Putnam Global Natural Resources A (EBERX) E+ Energy/Natural Res 1.23 -44.06 -49.22 -4.85
Putnam Growth Opportunities A (POGAX) C- Growth - Domestic 1.53 -25.18 -36.92 -7.57
Putnam Health Sciences Trust A (PHSTX) B- Health/Biotechnology 1.17 -15.73 -17.74 -3.14
Putnam International Capital Opp A (PNVAX) D- Non-US Equity 1.49 -41.45 -54.87 -6.72
Putnam International Equity A (POVSX) D- Non-US Equity 1.25 -36.65 -49.23 -6.63
Putnam Intl Growth & Inc A (PNGAX) D- Non-US Equity 1.35 -37.81 -51.11 -7.71
Putnam Intl New Opportunities A (PINOX) D+ Non-US Equity 1.73 -32.78 -47.04 -4.27
Putnam Investors Fund A (PINVX) D+ Growth - Domestic 1.08 -22.16 -40.29 -9.91
Putnam Mid Cap Value Fund A (PMVAX) E+ Mid Cap 1.23 -31.41 -42.80 -8.66
Putnam New Opportunities A (PNOPX) C- Growth - Domestic 1.17 -27.73 -38.19 -7.61
Putnam New Value Fund A (PANVX) D- * Growth - Domestic 1.14 -25.00 -45.23 -12.05
Putnam OTC Emerging Growth A (POEGX) D * Mid Cap 1.48 -31.45 -42.45 -6.65
Putnam Research Fund A (PNRAX) C Growth - Domestic 1.25 -22.52 -37.68 -7.78
Putnam Retirement Ready 2010 A (PRXRX) B+ Asset Allocation - Domestic 1.01 -17.17 -22.71 -4.09
Putnam Retirement Ready 2015 A (PRRHX) B Asset Allocation - Domestic 1.08 -19.17 -26.99 -4.66
Putnam Retirement Ready 2020 A (PRRMX) C+ Asset Allocation - Domestic 1.16 -21.85 -32.02 -5.80
Putnam Retirement Ready 2025 A (PRROX) C+ Asset Allocation - Domestic 1.2 -23.88 -35.23 -6.39
Putnam Retirement Ready 2030 A (PRRQX) C Asset Allocation - Domestic 1.22 -25.10 -37.12 -6.95
Putnam Retirement Ready 2035 A (PRRWX) C Asset Allocation - Domestic 1.25 -25.85 -38.45 -7.29
Putnam Retirement Ready 2040 A (PRRZX) C- Asset Allocation - Domestic 1.26 -26.39 -39.49 -7.46
Putnam Retirement Ready 2045 A (PRVLX) D Asset Allocation - Domestic 1.27 -27.10 -40.51 -7.71
Putnam Retirement Ready Maturity A (PRMAX) B+ Asset Allocation - Domestic 0.97 -16.55 -21.17 -3.94
Putnam Small Cap Growth A (PNSAX) D- Small Cap 1.68 -29.02 -42.57 -10.81
Putnam Small Cap Value Fund A (PSLAX) E- Small Cap 1.39 -25.10 -41.26 -11.67
Putnam Tax Smart Equity A (PATSX) D+ * Growth - Domestic 1.18 -22.10 -40.25 -10.24
Putnam Utilities Gr & Inc A (PUGIX) B+ Utilities 1.18 -24.25 -33.07 0.87
Putnam Vista Fund A (PVISX) D Mid Cap 1.11 -33.17 -43.42 -11.14
Putnam Voyager A (PVOYX) C- Growth - Domestic 1.14 -25.75 -37.59 -9.07
           
S&P 500 Composite Total Return -23.11 -36.10 -5.21
* To be merged into another Putnam fund.
Note: All funds in the table have $500 minimum initial investment requirements and are subject to initial sales changes of up to 5.75%.
Source: TheStreet.com Ratings - Data as of 10/31/2008
For an explanation of our ratings, click here.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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