Putnam perfect partner: Newton

BT Funds Management's decision to pick Putnam as the manager for its international share portfolio had little to do with the fact the same manager was used by its sister company Sagitta (formerly Rothschild Australia Asset Management).

Earlier this year Westpac bought Rothschild and it is currently in the process of acquiring BT. When it announced the BT deal the bank outlined changes to the funds management structure which included replacing BT's own international share manager team with new people.

BT Funds chief operating officer Mike Newton says Frank Russell drew up a list of 23 possible managers and that was whittled down to a short list of three. He says there was little to separate the final two and the fact that Putnam also managed money for Sagitta only became a factor at the very end of the selection process.

Newton says while Putnam's style is very close to BT's the make up of its core portfolio is quite different. Both are bottom-up, active managers.

To get the BT portfolio looking the same an unnamed transitional manager has been appointed to take over the money at the end of October when BT's Sydney-based managers officially finish.

The transitional manager's job is to migrate the BT portfolio to match Putnam's core one in the most cost-effective way.

Newton says it's too hard to say how long this will take, and the cost of the transition is likely to be somewhere between 8 and 15 basis points.

The identity of the transitional manager is being kept under wraps to avoid people trying to take advantage of the switch over.

Newton says the manager is specialised in this area and can do many of the trades off-market.

Newton says while the international share pools will be identical to Sagitta once the transition is completed it will be kept separate.

However, at some point in the future they will be brought together.

Newton expects the shift to Putnam will help BT in the institutional market. He says the company had struggled in the area previously as the asset consultants didn't like the fact that BT managed international money out of Australia.

Newton is really pleased with the Putnam appointment: "It's just about as perfect as you could get".

One of the things which differentiates the appointment is that the relationship between the managers is strategic in nature and Putnam will put people on the ground in Australia.

Also it's an exclusive arrangement in Australia and New Zealand.

The other big plus for BT is that it now puts them on the front foot and it can start getting out into the market again.

Newton says that BT is planning a November roadshow in New Zealand with the people from Putnam.