Reynolds: Focus on the (Time) Horizon

Bob Reynolds is president and chief executive officer of Putnam Investments, a member of Putnam Investments' executive board of directors, and president of the Putnam Funds. He has more than 30 years of investment and financial services experience.

Prior to joining Putnam Investments in 2008, Reynolds was vice chairman and chief operating officer of Fidelity Investments from 2000 to 2007. During this time, Reynolds served on the board of directors for FMR Corporation, Fidelity Investments Insurance Ltd., Fidelity Investments Canada Ltd., and Fidelity Management Trust Company. He was also a trustee of the Fidelity Family of Funds.

We interviewed Reynolds on June 2; here's a transcript of the interview.

Q: What do you think were the strengths you saw at Putnam that you could build around when you started there?

A: Number one was that Putnam has a 75-plus-year history, so it has tremendous brand awareness in the marketplace.

It's also a firm that I have known. Having competed against it for two decades, I knew the strengths and weaknesses of their firm. They had an excellent fixed-income team in place, an excellent global-allocation team. The problems, as I saw them, were on the equities side, which I thought were very, very fixable with the right people, the right process, the right compensation structure in place.

And I did love their distribution. It has always been through the advisor channel, which to me is the future of mutual fund distribution, and Putnam's strength has always been distribution, and I would say service along with that. So it was a combination of things that brought me to Putnam.

Q: What are the most significant changes you've made at Putnam, and why did you undertake them?

A: I would put them in two baskets: One, we totally restructured the equity area at Putnam, bringing in new people on the fund management side and rebuilding fundamental research, and we did change compensation; and then, in another bucket, we rolled out 14 new products that played off the strengths of Putnam, and they were based on needs we saw in the marketplace. So I think it was a combination of those two things.

Q: What do you think is right with the U.S. retirement system, and what do you think needs improvement?

A: I think the 401(k)/defined contribution system is the right system for America's workforce because of its portability, self-determination, and ability to customize to the individual. I do think the system itself is a great system.

As with everything in life, I do think it can be made better. A lot of changes have happened over the last 20 years in 401(k)s--the system has been one of the most dynamic, self-correcting systems that I've seen, and I think there's tremendous opportunity to make it a better system.

Q: What do you think is the most pressing issue facing investors today?

A: The current market! I think the volatility of the market--the uncertainty--clearly is the most pressing issue facing investors. Whenever you have this type of market, these types of conditions, it makes the value of the advisor that much greater, and I think that's a real opportunity for people to provide advice service in today's market.

Q: What should or shouldn't the fund industry be doing to restore investor confidence, in the wake of having two bear markets in a decade?

A: So much of investing--probably the most critical point--is time horizon. It's having a real grasp on what you are investing for. The most interesting thing about the market is that the longer-term your time horizon, the more predictable the market is. I think it's time horizon and being able to put together the right portfolio, and then taking that type of view of the market and not react to day-to-day movement.

Q: What advice do you give to advisors who are trying to keep clients during markets like this?

A: Move your money to Putnam! (laughs) The key is try to find the right fund firm, the right products, and be willing to stay with them. I think there is an influx of new products; we've been on the forefront of the whole absolute-return concept, which allows people to participate in the market at much lower volatility levels. It'll be that type of innovation and structure that I think will pay dividends over the long term.

Q: Do you think there will be a day when Putnam goes no-load or makes more-aggressive fee cuts in the wake of the new transparency moves that have been going on?

A: I don't think so. We have shares that are load-waived, that are no-load today�Y-shares that are used in a lot of defined-contribution plans�so I think that adjustment's already in play. The idea of going totally no-load and direct distribution will not happen at Putnam. We're dedicated to the advisor and that's a channel we will stay dedicated to.