Putnam Refocusing Voyager
Sunday, April 16, 2006
Putnam Investments money managers Kelly A. Morgan and Robert E. Ginsberg are overhauling the firm's second-biggest mutual fund to revive performance after assets plunged 75 percent, to $10 billion, since 1999.
Morgan and Ginsberg, who took over in March 2005, sold shares of General Electric Co., the world's second-largest company by market value; drugmaker Pfizer Inc.; and Wal-Mart Stores Inc., which accounted for a combined 7.4 percent of the fund's assets. They increased the Putnam Voyager Fund's stake in financial-services stocks to 14 percent from 11 percent.
The Voyager Fund, among the mutual fund industry's top performers in the late 1990s, rose 13 percent in the past year, ranking 174th of 235 funds tracked by Bloomberg that focus on companies reporting above-average profit growth. The Putnam fund fell at an annual rate of 0.4 percent in the past five years, compared with the average 5.5 percent gain of competing growth funds.
"Is there pressure? Absolutely," said Morgan, 43, in an interview at Putnam's Boston offices. "We both feel we're up to it."
Voyager soared 56 percent in 1999, and assets rose to $40.6 billion, driven by holdings in computer-related companies. When the Internet-led market rally ended a year later, Voyager declined 17 percent. It dropped a further 18 percent in 2001 and 27 percent in 2002.
A combination of below-average investment returns and a trading scandal prompted investors to withdraw almost $100 billion from Putnam's mutual funds since 2001, according to Boston-based Financial Research Corp. Putnam agreed to pay $193.5 million in penalties stemming from probes by the Securities and Exchange Commission and Massachusetts Secretary of the Commonwealth William Galvin into allegations of improper fund trading.
The Putnam Fund for Growth & Income is the firm's largest, with $15.6 billion of assets.
Voyager "was one of the more broken funds under the Putnam umbrella," said Laura Lutton, an analyst at Morningstar Inc., an industry research firm in Chicago.
Morgan, a graduate of Middlebury College in Middlebury, Vt., and Harvard Business School who's worked at Putnam since 1996, and Ginsberg, a graduate of the University of Pennsylvania, replaced Brian O'Toole at the helm of Voyager a little more than a year ago.
Morgan and Ginsberg search for companies whose shares are cheap compared with their potential to generate cash.
Of the fund's 10 largest holdings, five remain from their predecessors, led by Johnson & Johnson, the New Brunswick, N.J.-based maker of thousands of products from mouthwash to heart stents.
The fund managers bought shares of Commerce Bancorp Inc.; mortgage lender Countrywide Financial Corp.; and credit-card issuer American Express Co. Shares of all three rose more than 12 percent in the past year, with Commerce Bancorp gaining the most, up 24 percent.