The corporate logo of Putnam Investments is seen on the front of the mutual fund company's headquarters in Boston, October 24, 2003.Jim Bourg/Reuters
Even in a hot year for North American stocks, Great-West Lifeco is having trouble making Putnam Investments profitable.
When the Canadian insurer reported earnings last week, total profit jumped to $687-million, its third straight quarterly increase. Yet Putnam Investments, Great West's Boston-based asset manager, continues to suffer, losing $8-million (U.S.) more after-tax last quarter, after accounting for a one-time tax charge.
Over the past two years, Putnam has lost $152-million after-tax.
The long string of losses has analysts exasperated. Ever since Great-West acquired Putnam for $4.6-billion (Canadian) in 2007, the business has struggled. At one point, Putnam lost almost half the value of its assets under management.
Even though seven years has passed since the acquisition, Putnam still hasn't seen the value of its assets under management fully rebound. Just before the purchase, AUM totaled $193-billion (U.S.). Today they amount to roughly $160-billion, despite U.S. stock markets setting near record highs.
Hefty expenses have plagued Putnam. Before management started hacking away at costs, the company's ratio of expenses to revenue were roughly double that of sister asset manager MFS, owned by Sun Life Investments.
Although costs have come down significantly, Putnam is still losing money. And analysts do not expect it to break even until assets grow to somewhere near $190-billion.
To this end, Putnam finally has positive sales momentum. The company has now put up five straight quarters of net sales, with $1.4-billlion added last quarter.
However, the much anticipated moment when Putnam breaks even is still a ways off. Provided the company keeps posting positive sales, there is still only a small chance that it starts making money next year. The more likely date for this momentous occasion will be 2016. Not so great for Great-West Life.
Tim Kiladze