UK – US-based fund manager Putnam Investments is looking to double its European institutional assets under management, says its top European executive.
Managing director Stephen Cohen says Putnam is looking to double the seven billion dollars(six billion euros) in European institutional assets it has under management within five years.
“What we’d like to be able to do is build a significant European institutional business over time,” Cohen said in an interview.
Growth would come from knocking on clients’ doors and expanding its product range. Part of the new product strategy is an absolute return product.
Cohen said there was “clearly a demand out there” for such products. The firm has been incubating strategies in-house using seed money to see what works.
The move into absolute returns reflects the underlying shifts among investors. It was “driven by demographics”, he said. As the average age of investors becomes older – or as pension funds become more mature – their focus shifts to wealth preservation from wealth creation.
Putnam has not recruited any new staff in connection with its move into absolute returns, Cohen said, though it has built up its risk staff over the last few years.
He said the firm has put a “huge amount of money” over the last three or four years into risk management systems. These systems could also be used in hedge fund portfolios, he said, though they were built primarily for long-only products.
Pension funds are going to have to start doing something to address their deficits, he said. “It’s unlikely that just being passively overweight equities is going to deliver the goods.” He added: “In a low return environment active management becomes even more worthwhile.”
He put forward the idea of currency overlay as a way to leverage pension fund assets. “There are dollar bills lying on the ground,” he said, due to the inefficiencies of the currency markets.
Cohen also commented on pension funds’ asset allocations, suggesting that they take a more “market” approach. He said strategic asset allocation could be reviewed on a two to three year basis. Funds could be “a little bit more nimble” in this respect.
Putnam is part of Marsh & McLennan, which also owns consultancy firm Mercer. Cohen said there is an “arm’s length” relationship between Putnam and Mercer. “We have to stand in line like everybody else.”
Cohen, 47, joined Putnam in September 2002 from Zurich Scudder Investments, where he was head of institutional business. He took over from Thomas Reilly as Putnam’s European head in March this year.
In April, MMC reported that Putnam’s first-quarter revenues declined 25% to 445 million dollars and its total institutional assets under management declined to 86 billion dollars from 87 billion dollars.
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