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Layoffs Mount in Mutual Fund Industry

BlackRock, Capital Group, Fidelity, and Putnam are the latest firms to cut jobs.

Morningstar Analysts, 11/24/2008

Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.

The global market turmoil is taking its toll on the U.S. mutual fund industry, forcing more firms to lay off employees.

BlackRock plans to cut jobs through the end of this year. Although the firm has yet to disclose the total number of expected layoffs, it has already let go roughly a dozen investment personnel. The list includes Linda Zhang, comanager of BlackRock Asset Allocation PCBAX; Jordan Schreiber, longtime lead manager of BlackRock Healthcare MAHCX; Jeff Gary, comanager of BlackRock High Income MDHIX and BlackRock High Yield Bond BHYAX; and Tom Burke of BlackRock Fundamental Growth MDFGX and BlackRock Global Growth MDGGX, along with the team of six or so analysts that supported him. The remaining managers on the Asset Allocation, Healthcare, High Income, and High Yield Bond offerings will take over the departed managers' responsibilities. Jeff Lindsey of BlackRock Capital Appreciation SRLAX will take over Fundamental Growth, and Tom Callan and Michael Carey of BlackRock Global Opportunities BROAX will run Global Growth.

American Funds' parent Capital Group Companies will continue to reduce its staff in the coming weeks. The firm has already eliminated 60 support staffers in its Global Institutional Group in Europe, divided between the London and Geneva offices. The GIG investment management team has not been affected. Capital Group spokesman Chuck Freadhoff says that "as assets under management have declined, the support structure that you build for a larger asset base is no longer needed." He said shareholders of the American Funds, which operate in a separate division of Capital Group, will not be affected.

Fidelity Investments recently announced its second round of layoffs. It is planning to cut roughly 1,400 jobs in the first three months of 2009, which will bring the total number to 3,000, or roughly 7% of its work force. The firm has suffered in the last year, as its equity offerings, including flagship Fidelity Magellan FMAGX, have shrunk in size due to steep losses and record-high shareholder redemptions. Fidelity's fixed-income side has struggled, too. A number of its short-term bond funds were caught owning subprime-backed bonds. Fidelity has yet to disclose if this latest round of layoffs will affect its investment staff.

Fidelity's Boston neighbor, Putnam Investments, announced on Monday that it is cutting 47 jobs, including 12 portfolio-management positions. These departures have less to do with cost-cutting than with revamping its struggling equity lineup, though. Previously, almost every equity fund at Putnam was team-managed with quantitative and fundamental managers aboard. New CEO Bob Reynolds says he wants to move to a single-manager format so that there's "individual accountability and responsibility of the funds." He also wants to shift the emphasis away from quantitative research and toward fundamental analysis, which is why almost all the fund managers let go had quant backgrounds.PAGEBREAK

Putnam departures include Jeanne Mockard and Geoffrey Kelley of George Putnam Fund of Boston PGEOX; Michael Abata of Putnam New Value PANVX and Putnam Classic Equity PXGIX; James Wiess of Putnam Investors PINVX, Putnam Tax Smart Equity PATSX, and Putnam Capital Appreciation PCAPX; Bradford Greenleaf of Putnam Global Equity PEQUX; Michael Scafati of Putnam International Equity POVSX; John Ferry of Putnam Capital Opportunities PCOAX and Putnam International Capital Opportunities PNVAX; Kevin Divney and Brian DeChristopher of Putnam Vista PVISX and Putnam New Opportunities PNOPX; Rick Weed of Putnam Small Cap Growth PNSAX, Putnam Discovery Growth PVIIX, and Putnam OTC & Emerging Growth POEGX; David King of Putnam Convertible Income-Growth PCONX and Putnam New Value PANVX.

Putnam also plans to roll the following six funds into larger, cheaper siblings with similar investment styles in the next 30 to 60 days (shareholder approval wasn't required): Putnam Classic Equity will merge into Putnam Fund for Growth & Income PGRWX; Putnam Discovery Growth into Putnam New Opportunities; Putnam New Value into Putnam Equity Income; Putnam OTC & Emerging Growth into Putnam Vista; and Putnam Capital Appreciation and Putnam Tax Smart Equity into Putnam Investors. The acquiring funds' fundamental managers will stay put.

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