Fund Times: Putnam and MFS Rumored to be Seeking Buyers

The parents of Putnam Investments ( Marsh & McLennan Companies (MMC)) and MFS Investment Management ( Sun Life Financial Services  (SLF)) have both confirmed this week that they may sell the asset managers. The media has reported that numerous firms are exploring a deal, including Franklin, T. Rowe Price, Ameriprise (parent of the RiverSource funds), and Morgan Stanley. Putnam and MFS fundholders could benefit from a sale, according to Laura Pavlenko Lutton, the lead Morningstar fund analyst for both firms. Both families have struggled to deliver strong returns from some of their largest, best-known offerings, including  MFS Massachusetts Investors Growth Stock (MIGFX) and  Putnam Voyager . (Both offerings have trailed the large-growth category average for the one-, three-, and five-year periods.) An acquirer could merge these funds into stronger offerings--a move that also could result in lower fees, Lutton said.

Some of these potential combinations seem to have both positive and negative aspects to them. If MFS, for example, were merged with T. Rowe, the latter firm would finally gain some traction in the advisor world, something it has been seeking for a while, and the firm would nearly double its mutual fund assets under management, from $170 to $338 billion. Additionally, MFS' respectable international fund lineup would add to T. Rowe's offerings in that arena. However, problems could arise involving capacity constraints, particularly in the small- and mid-cap strategies the resulting firm would run. Whatever combination ultimately results (if any at all), the merger would follow a couple of other recent high-profile asset manager mergers, such as the Merrill Lynch/BlackRock and Citigroup/Legg Mason combinations. In the case of these two mergers, we think investors have on balance come out ahead, but combining two firms with potentially different cultures can be a tricky business, so we'll be watching closely as information comes out of the Putnam and MFS negotiations.

For now, however, Lutton advises fundholders to stay put until recent acquisition rumors are resolved. If deals are announced, investors can then weigh whether they'll personally benefit from the merger, or whether they'd be better off elsewhere.

Jensen's Hibler to Retire
Jensen Investment Management president Gary Hibler, who also is comanager of the  Jensen Fund (JENSX), will be stepping down from these duties on or around Feb. 15, 2007, after 15 years at the firm. He will remain a director of the fund, which remains in good hands with its four other managers. Robert McIver will become president upon Hibler's departure.

Manager Changes at Hartford
Wellington Management Company's Saul Pannell, who had stepped in to help out at various offerings at Hartford (Wellington is subadvisor to the funds), including  Hartford Stock ,  Hartford Focus , and  Hartford Advisers (ITTAX), is back to running just the firm's signature fund,  Hartford Capital Appreciation (ITHAX). Peter Higgins, formerly of Dreyfus affiliate The Boston Company, where he successfully managed  Dreyfus Midcap Value (DMCVX), was brought on board here and named comanager to the funds with which Pannell was helping. We're pleased with the addition of Higgins to this fund lineup, because he had a strong track record at The Boston Company.

The Fidelity Shuffle
Fidelity has announced another manager change. Charles Hebard, of  Fidelity Select Financial Services (FIDSX), will take over as manager of  Fidelity Blue Chip Value (FBCVX), as that fund's manager, Brian Hogan, assumes his new role as director of equity research.

Janus Funds Change Name
Janus Research (JARFX) will change its name to Janus Global Research at the end of the year and will shift its benchmark from the Russell 1000 to the MSCI World Growth Index. This change makes the fund both more globally and growth oriented.

Meanwhile,  Janus Mercury (JAMRX) will become Janus Research, and it will maintain its Russell 1000 Growth Index benchmark. Both of these funds are run by Janus' team of research analysts, which will not change.

Payday for PowerShares
AMVESCAP has announced the formal completion of its acquisition of PowerShares Capital Management, whose ETF lineup will now be distributed by AIM Investments.