In June 2008, Bob Reynolds, the former Fidelity Investments vice chairman and COO, joined Putnam Investments. His impact was nearly immediate, and the turnaround at Putnam has burnished Reynolds’ star to the point where he has become a major spokesman for the investment community, recently weighing in on the national stage on both retirement planning and the federal debt. Group Editor in Chief Jamie Green talked with Reynolds in New York in late May.
You’ve made quite an impact at Putnam. What have you accomplished?
The past three years have been an interesting time in business and the economy. When I joined Putnam there were internal issues compounded by the markets, but also opportunity. I always loved Putnam’s distribution model—90% of our products are advisor-sold. Putnam’s ownership also drew me to the firm—The Power family are long-term investors; they wanted a global asset management business as a growth engine for the company, and they said, “Let’s get it right.” First, I looked at what was working—made sure we had the right products. Thus the absolute return products, [a strategy] which was used institutionally, but we worked it out in ‘40 Act funds. Our fixed income offerings were good, but the equity side was not working. Some of it was process, some people. So we added seven to eight portfolio managers and 30+ analysts, since not enough was being done on fundamental analysis. One of our key hires was Walter Donovan, who had worked with me at Fidelity, and had run money market, fixed income, high-yield and equities; he just had his two-year anniversary.
You changed the compensation structure for your PMs?
I’m a big believer that compensation can be powerful. We’re a money management firm, so we have to perform. We instituted a compensation structure that reflects the goals of the firm.
What about advisors?
We want our advisor clients to have expectations of us—that we’ll perform. I thought our fixed income fees were too high so we cut some by 60%. We only sell to advisors; they’re the future. The need and demand for advice will only grow from here, and it will be a great business for as long as we can see.
What’s next for Putnam?
We’re committing talent to international and global. You want to perform well across all asset categories, because you never know what’s going to be in favor. When your time comes, you want to be ready.
There will also be a huge focus on retirement income; it will be a battleground. How do you create a lifetime income stream? We’re working on solutions both through product and technology—a tool for advisors that will help their clients to plan [for retirement]. After all, what people want to replicate in retirement is their paycheck. We’re also working on alternatives, both in a ‘40 Act fund and other vehicles, to help in the management of volatility.
You’ve been outspoken about the federal deficit lately.
The deficit needs to be taken down; it’s a national security issue. And what’s happening around the world affects us here; 50% of U.S. debt is held overseas.