BOSTON - What started out as charges of improper trading againstPutnam Investments by regulators, quickly spiraled to at least adozen states pulling billions of dollars in pension funds from theembattled firm to the chief executive stepping down as the scrutinymounted. In the wake of it all, it remains to be seen whatlong-term effects the fallout will have on the many CUSOs that havemoney invested in Putnam mutual funds but some agree that anydecision made now must be devoid of hysteria. CUNA Mutual Group issuggesting that CUSOs and other credit union organizations make"appropriate investment decisions which are not based merely on anemotional environment, which news of this nature can create," saidPhil Tschudy, CUNA Mutual Group Media Relations Manager. "Whileclearly significant, this situation does not shake the basicfundamentals of investing or of investing in mutual funds." On Oct.28, federal and state regulators filed civil fraud complaintsagainst Putnam and two former portfolio managers for market timingtrades, which are not illegal but generally hurt investors becausethe trades are often designed to buy funds ahead of markups in thevalues of holdings and then sold quickly after the fund's priceincreases. Days later, public pension funds in Massachusetts, NewYork, Vermont, Pennsylvania, Rhode Island and Iowa pulled more than$4 billion from Putnam. Putnam is the nation's fifth largest mutualfund company with $272 billion in assets under management,according to company data. On Nov. 2, Lawrence Lasser resigned aschief executive of Putnam in the wake of civil fraud allegationsagainst the company. Credit Union Times contacted a number of CUSOsbut most were reluctant to talk or did not return messages. CAP COMFinancial Services LLC, the CUSO of Albany, N.Y.-based CapitalCommunications Federal Credit Union was named to the Putnam'sGolden Scale Council in May. The Council consists of investmentprofessionals who have met certain professional standards inserving investors during the previous year. Of the $120 millioninvested for members, a portion are Putnam mutual funds, said JohnShartrand, chief investment officer, CCFCU who would not discloseexactly how much is invested "In general, our allegiance is to themembers," Shartrand said. "We have received a few calls frommembers but for most, no changes are needed. At least three(members) needed a bit more diversification anyway." Shartrand saidit is unfortunate that a "few rogue reps" have tarnished Putnam'sreputation. Generally speaking, any advisor worth his or her salt,would review an investor's situation and then react, he added. "Ina perfect world, two or three (mutual fund) companies allow fordifferent perspectives," Shartrand said. "Mutual funds are doing agreat job now and if there's any lesson here it would be to have awell diversified portfolio and be sure your assets are allocatedappropriately." CUNA Mutual is encouraged that "Putnam has assuredthe investing public that the portfolio managers involved in thealleged activities are no longer involved in the management ofcustomer funds," Tschudy said. To Putnam's credit, the company hasprovided SEC and the Commonwealth of Massachusetts "with thousandsof pages of documents and access to our people, toward resolvingthese issues in an appropriate and expeditious manner," accordingto a statement on its Web site. Further, Putnam "monitors almost2,000 retirement plans with over 1.8 million plan participants forpotential market timing activity. Among our retirement plans, asmall number of plan sponsors and plan participants resisted ourefforts to stop their activity," the statement read. Starting Dec.1, Putnam said it "will initiate a short-term redemption fee acrossall global and international funds in our retirement business."-

[email protected]