by Bradley Parsons
Staff Writer
The City will call to the next pension fund board meeting representatives from its second largest fund manager to ensure improper “market timing” trades did not affect City investments.
Putnam investments oversaw the trading of more than 11 million shares for the City last year, returning about a half million in commissions to a variety of brokers. The Boston–based company is the county’s fifth–largest mutual fund manager with $272 billion in assets and 12 million investors.
Earlier this month, Putnam replaced its CEO after four fund managers were charged in late October with civil fraud. Federal regulators filed charges, claiming Putnam allowed the managers to take advantage of international time differences to rapidly trade in and out of mutual funds. So–called “market timing” is not illegal, but the practice could be fraudulent if investors are not notified. Many mutual funds bar the practice because the frequent trades hurt long–term performance.
Shortly after the fund managers were dismissed, Massachusetts pulled about $1.8 billion from Putnam–managed pension accounts.
Mayor’s office spokesperson Heather Murphy said the City decided to call its Putnam fund managers in front of the pension board strictly as a precautionary measure. She said the City was happy with the performance of the Putnam–managed fund.
“Essentially this is just a monitoring function stemming from an abundance of caution,” said Murphy. “One of our employees astutely caught the fact that this had been going on elsewhere and we just wanted to call them in to make sure there was no effect from anything they did on any of our funds.”
Murphy noted that Putnam had moved quickly to remove those responsible.
“We know they’ve taken swift action and, at this point, there’s no evidence of any effects,” she said. “We caught this and we just want to make sure our money is OK; that’s efficient monitoring.”