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Fund Times: American Century Sees Big Departure

Plus, news on the likely Putnam sale, Evergreen brokerage fines, and more.

Morningstar Analysts, 01/08/2007

American Century is losing a key executive and investor. Harold Bradley, chief investment officer of U.S. growth equity mid-cap and small-cap sectors, is leaving the firm Jan. 31. Bradley also served as portfolio manager of American Century New Opportunities TWNOX, American Century New Opportunities II ANOAX, and American Century Select AASLX. He leaves to become the CIO of the Kauffman Foundation in Kansas City, Mo. Enrique Chang, American Century's incoming CIO, will now also serve as Bradley's interim successor.

We think this departure, the most recent of several over the past year, is a real blow to the firm because Bradley was a key player in the development of the quantitative models that drive the small- and mid-growth strategies. While there are others at American Century who will be able to continue this work, Bradley's loss will be felt. Additionally, Bradley was a forceful advocate for investment industry reforms, which included Congressional testimony critical of fund companies' use of soft dollars.

Canadian Firm to Buy Putnam
Marsh & McLennan Companies MMC agreed to sell its Putnam Investments money management subsidiary to Power Corp. of Canada for $3.9 billion, according to a news report in The Wall Street Journal. The sale is still subject to the approval of Putnam fund directors, shareholders, and employees.

The price Putnam fetched was closer to the higher end of the expected range. That is good news for Marsh and underscores Power's interest in entering the U.S. mutual fund marketplace. Power already is a large player in the Canadian mutual fund market through its IGM Financial subsidiary, but Putman's roughly $190 billion in assets under management (roughly $94 billion of which is in its retail mutual fund business) would immediately place Power among the top dozen largest U.S. mutual fund companies.

Should the sale ultimately go through, the uncertainty that has surrounded the Putnam funds for the past several months would come to an end, but that wouldn't necessarily be the end of Putman's troubles. In recent years the fund company has seen several billion dollars in outflows from its fund business, due both to underperforming funds and scandal, and these troubles will not easily be remedied. Overall, we think Putnam's turnaround remains a work in progress, and in particular, we'd like to see greater stability in the manager ranks and evidence of improved analyst research before we take a more favorable view of the shop as a whole. Power Corp. could have an impact here, so we'll be watching closely.

Evergreen Find Some Green
Evergreen Investment Services, the affiliated distributor of the Evergreen family of funds, has been fined $4.2 million by the NASD. Evergreen Funds distributor directed portfolio trades from Evergreen funds toward Wachovia-affiliated brokers who had sold a certain number of Evergreen fund shares, creating a conflict of interest and potentially harming Evergreen fund shareholders by discouraging the funds from seeking the lowest possible trading commissions. As is typical in settlements like this, Evergreen neither admitted nor denied guilt.PAGEBREAK

Thornburg Fixed-Income Veteran Retires
Thornburg Investment Management has announced the retirement of veteran bond manager Steve Bohlin, who worked at the firm for more than 22 years. Jason Brady will succeed Bohlin on Thornburg Limited-Term Income THIFX and Thornburg Limited-Term U.S. Government LTUSX. Brady will also comanage Thornburg Investment Income Builder's TIBAX fixed-income segment. Brady has experience managing fixed-income portfolios at Fortis Investments and has also worked with various debt market sectors, such as high-yield, agency, and governments, at Fidelity Investments and Lehman Brothers.

SSgA Fund Adds Comanager
SSgA Yield Plus
SSYPX will add Robert Pickett to its management team, replacing Julio Fuentes. Pickett, an SSgA veteran who heads up asset allocation and global high-grade credit departments, will join Frank Gianatasio and will bring good experience to the fund. While we like the offering, we have been disappointed by its rising expenses in recent years. With lower costs, the option would be more compelling.

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