California's treasurer has urged the state's two giant pension funds to pull their assets from Putnam Investments, ratcheting up pressure on the troubled US mutual facing civil securities fraud charges.
Treasurer Mr Phil Angelides said the California Public Employees' Retirement System (Calpers) and the California State Teachers' Retirement System (Calstrs) should take their combined $1.5 billion in assets invested with Putnam to another money management firm following accusations that Putnam engaged in improper trading of fund shares.
Putnam was managing $272 billion in assets at the end of the third quarter and mutual fund industry sources reckon the company has so far lost about $6 billion of that since the scandal erupted.
Yesterday, three New York City pension plans with combined total assets of $725 million said they would pull their holdings from Putnam Investments. New York City Comptroller Mr William Thompson made the announcement on behalf of trustees of the New York City Employees Retirement System, the Police Pension Fund and the Teachers' Retirement System.
Federal and Massachusetts regulators have accused Putnam of letting some clients and several managers engage in so-called market timing, a practice Putnam publicly prohibits. Two Putnam managers were also accused of securities fraud.
Market timing involves buying and selling shares of mutual funds very quickly to try to profit from stale prices. While the practice is not illegal, fund companies say they discourage it because it drives up trading costs and waters down the profits of long-term investors.
Putnam has denied any wrong-doing and said market timing stopped in 2000. Regulators, tipped off by a Putnam employee, said it continued into 2003.