Sometimes you got to pay to play well.

And in the case of Putnam [profile], that has led to elusive profits.

Since Putnam was acquired by the Canadian firm Power Financial Corp. in 2007, the asset manager has generated only six profitable quarters, according to Pensions & Investments .

P&I reporter Rick Baert writes that quarterly net losses attributed to Putnam have gone from $1 million in the third quarter of 2010 to $37 million in the fourth quarter of 2009.

Meanwhile, Baert notes, AUM as of June 30 was $134.7 billion, up 37% from $98.6 billion on March 31, 2009, which was the lowest since Power acquired Putnam.

Baert writes that the gains have mainly come from market performance, because asset flows generally have been negative.

Robert Reynolds, president and CEO of Putnam, told Baert in an interview that incentive compensation for portfolio managers, analysts and other investment executives was the primary cause for the net losses.

Reynolds, who was formerly chief operating officer at Fidelity Investments, Boston, became president and CEO of Putnam in 2008, and recruited several senior people from Fidelity, Baert notes. They included: Walter Donovan, chief investment officer; Shep Perkins, portfolio manager and co-head of international equities; and Aaron Cooper, director of global equity research.

“We pay for performance,” Reynolds told Baert in an interview. “If a manager performs, they will get paid ... It's an expensive way to do it, but you build consistent performance that way. Great-West understands that to deliver the performance, you have to get the right people. Great-West is totally behind us.”

To learn more about Reynold's strategy, and what analysts and experts think about it, turn to Pensions & Investments. 

Edited by: Tommy Fernandez


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