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Can Haldeman Convince the World That Putnam Has Changed?

BOSTON--Life after Lasser at Putnam Investments isn't as bad as it might appear from afar. A staple of Bean Town's financial district, Putnam is in the process of an "Extreme Makeover" after experiencing one of the biggest kicks in the teeth the industry has ever seen.

It has cut fees, settled with regulators and is poised to lift the curtain on transparency. New CEO Charles "Ed" Haldeman, Jr. recently said Putnam is trying to be a leader for reform in the industry, seemingly sounding at times even a bit Bogle-like.

Will it all be enough to make the world forget about Putnam's misdeeds? More importantly, will the public buy into Putnam's remade image and newfound philosophy? Haldeman delves into these topics and more in the second of a two-part interview with MME (see MME 2/9/04).

MME: Why are you the right person to lead Putnam now?

Haldeman: I think there are many people who could -- some at Putnam, some other places.

I can be helpful to Putnam now because I have spent my whole life investing money. I got into the business in 1972 and have spent all of my career as a money manager, so I'm not a businessperson per say. I'm really an investor.

Related to that is the fact that I got into the business back in the 1970s, when people were attracted to this business by the fiduciary nature of it, rather than so much the money-making or business aspect of it. It's sort of natural as defining our job as taking care of other people's money, not so much selling funds or growing the business.

Probably at this point somebody who has been around the industry for a long time and is known in the industry is a pretty good choice to lead Putnam.

I'm also new to Putnam. If you are new to a place, it's pretty easy for you to advocate change and examine everything. Some change is a good thing at Putnam now.

MME: Why should investors choose a Putnam fund over a similar offering from Vanguard or Fidelity, or any other fund company at this point?

Haldeman: The No. 1 reason would be our commitment to consistent, dependable, superior performance over the long term. We have very experienced investment professionals working together as a team as well as a commitment by all the people at Putnam to be the best in the industry in regards to integrity and honesty and the seriousness with which we take our fiduciary responsibility.

You have to remember, we are a place that asked six portfolio managers to leave because they violated a fiduciary trust 3-1/2 years in the past. Everybody here is on notice that you don't get any second chances. There's no statute of limitations on that.

Every employee is on notice about how seriously we take that and what the penalties are if they violate that fiduciary trust. That is going to cause us to have higher standards than just about anybody in the industry.

MME: While it's been mentioned, we have not heard a lot about variable annuities in this scandal. Putnam has a huge VA business. Does the potential for the scandal to explode in this area concern you?

Haldeman: There is some more investigative work that has to be done by variable annuity firms. It would be surprising to me if there was no market timing whatsoever in that industry. I do know that many of the providers tried to police it as well as they could, but that doesn't mean that they were perfect or there weren't any problems in the industry.

We work with some excellent providers that have worked with us for a long time, and we feel good about our relationship with them. But again, I would say that for the VA industry as a whole, it would be surprising if there aren't any problems at all in terms of market timing.

MME: What is your take on what is happening in the fund industry now?

Haldeman: I feel what's going on at Putnam and in the industry is good. There's a cleansing that's going on and a self-examination of the whole industry, and I think the output will be a much better industry and a better product for our clients.

MME: Putnam has already done quite a bit to try and restore investor confidence. Can you explain what else you have planned?

Haldeman: I'll do that first by explaining what we have done to try and restore investor confidence so far.