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Another Executive, Richard A. Monaghan, Leaves Putnam: Experts Say It's the Latest Step in the Firm's Transformation

When a 51-year-old mutual fund executive retires, industry observers are curious.

When a 51-year-old executive retires from Putnam Investments, a money manager that has spent the past several years suffering through poor performance, fund scandals, and outflows, industry observers are suspicious.

The Boston money manager recently announced that Richard A. Monaghan, the head of its fund sales, would retire at the end of this month. William T. Connolly, who is the national sales director, will succeed the 51-year-old Monaghan.

Monaghan, who joined Putnam seven years ago after 13-year stint at Merrill Lynch, said in an interview announcing his retirement that the decision really had nothing to do with Putnam.

"This was my decision," he said, adding that "this won't be my last job" and "my feeling is that Putnam is still well-positioned. This isn't something I'd consider a work in progress. Putnam is in full-scale turnaround mode."

Industry observers were skeptical, however.

Putnam, a unit of New York financial services giant Marsh & McLennan, has suffered through a tumultuous period of outflows and senior management turnover since Ed Haldeman was named chief executive officer in November 2003. He succeeded Lawrence J. Lasser, who took the blame for Putnam's becoming, that October, the first mutual fund company charged in the trading scandals.

Financial Research Corp., a Boston company that tracks mutual fund flows, said Putnam had $27.1 billion of outflows from its equity and bond funds in 2003, lost another $28.89 billion in 2004, and $10.13 billion this year through June 30. And the estimated outflow in July was $1.95 billion, the research company said, up $72 million from June but nearly $200 million less than in July 2004.

"When we look at the net numbers, Putnam is still in the doghouse when it comes to sales," said Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I. "Their ability to attract assets continues to be impaired."

As assets flow out of Putnam, so do senior executives. Since Haldeman was promoted, half of the company's 50 highest-paid executives have left, and he has installed the chief compliance officer, general counsel, chief financial officer, chief administrative officer, and head of operations.

"Certainly it is not uncommon in situations like this where a firm is really trying to make radical positive changes that personnel changes are part of that equation," said Paul Werlin, the president of Human Capital Resources, a St. Petersburg, Fla., analytical firm.

Bobroff said Monaghan's departure could be the latest step in Haldeman's program to transform Putnam.

"Haldeman believes that he has fixed the investment side, but outflows have continued. Now he has to get sales jump-started," Bobroff said.

"The timing of [Monaghan's] retirement is entirely coincidental," Haldeman said in a statement. It was "driven by individual circumstances and shouldn't be lumped together" with other recent retirements.

Putnam's fund flows will take time to turn positive, he said, but he is confident that it will happen eventually.

"The flows are not where we want them to be," he said, but this isn't as important as "doing a good job taking care of existing clients' money."

Bobroff agreed - to a point - with what has been Haldeman's longtime position.

"The thing that cures these problems is time," he said. "I am not saying that Ed is running out of time, but time is something that he doesn't have a lot of... The landscape of distribution is changing, and Putnam has to change with it."

Monaghan is the third executive in his 50s to retire this year. In June, John F. Boneparth, 56, the head of its global institutional management business, said he would retire, and in February, Steve Oristaglio, 50, announced his plans to retire as head of investments.

Haldeman said in the statement that the "only common denominator" is that all three executives built "strong, deep, and stable sales and marketing organizations, which are poised to grow again."

Connolly, who was hired by Monaghan from Merrill in 1999, will oversee sales and marketing in all of Putnam's retail business.

Monaghan admitted that it has been difficult working at Putnam the past several years.

"We face a lot of morale issues in the organization," he said. "I feel good that we were able to keep our wholesaling force intact and have been able to successfully add new talent. ...what we have done with regard to retention of people and retention of assets. One could make the point that asset levels have gone down, but the number of clients and assets we have retained has been remarkable. At Putnam redemption rates are at the industry average, and they have been there since the middle of 2004. We have regained our performance and regained the trust of advisers and clients. Now, we can get the focus back on the investor."

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