Putnam to Cut Fees in Response to Scandals

Seeking to repair its image in the wake of mutual fund trading scandals, Putnam Investments vowed Tuesday to cut shareholder fees and give investors more information.

The expense reductions will put all of Putnam’s funds below industry-average expense ratios for their Lipper Inc. peer groups, the Boston company said.

“Putnam is determined to earn back the trust and confidence of the marketplace,” said Ed Haldeman, chief executive of the firm, which has slipped to No. 6 in assets from No. 5 last fall.

Withdrawals by small investors and institutions like the California Public Employees’ Retirement System have hurt Putnam stock and bond funds in the wake of federal and state civil fraud allegations that former portfolio managers traded fund shares in search of quick profits, contrary to the firm’s policy.

Putnam is the biggest fund company to announce fee cuts in response to the scandals that have tarred the industry since early September. New York Atty. Gen. Eliot Spitzer’s office has negotiated fee reductions from Alliance Capital Management and is discussing a similar deal with MFS Funds.

Putnam said most of its funds already carry below-average expenses, but about a dozen funds will be “marginally” affected.

Reduced upfront sales charges will provide added savings to investors, the firm said.

Putnam will cut the initial sales charge on most A class shares to 5.25% of the amount invested, from 5.75%. On a purchase of $10,000 in Putnam funds, that means the sales charge will be lowered to $525, from $575.

For the six international funds that had what the company called “short-term trading issues,” Putnam said it would cap the expense ratios at Sept. 30 levels. This will prevent investors from paying higher management fees or other expenses as a result of reduced asset levels, because defections may leave a smaller shareholder base to shoulder the costs.

Putnam also vowed to give investors “enhanced” information about fund fees, risk, sales charge discounts, portfolio manager compensation and employee ownership of the funds.