BT Funds Management (BT) has agreed to appoint Putnam Investments 1 to manage A$5 billion of international share assets within BT's range of managed funds and superannuation portfolios. The
announcement follows an extensive search by global research firm, the Frank Russell Company. Frank Russell's task was to find the best international equities manager - of similar investment style to that currently used by BT - for BT investors.
The following provides you with some further information on this appointment.
Thursday, October 17th 2002, 12:00AM
What was the selection process for appointing the manager?
The Frank Russell Company was appointed in early September after a competitive process.
Their brief was to find the best international manager with an investment style similar to BT.
23 Frank Russell buy-rated managers were assessed, with some eliminated on the basis of
style.
The short-listed candidates were requested to respond to a detailed Request For Proposal by
20 September.
The criteria for the selection of the short-listed candidates were capabilities for global equities
across BT's product range, continuity of investment style and suit able level of resources.
Onsite meetings at the managers' headquarters took place in the middle of September and were
attended by senior representatives of BT, with input from Sagitta and Westpac.
A short-list of managers presented formally to BT executives, with input from Sagitta and Westpac on
30 September.
Why was Putnam selected?
From the short-listed candidates, we agreed to appoint Putnam for a number of reasons:
they had a closer fit to BT's investment style
have a track record of delivering strong and consistent investment returns over time
possess a high level of resource and a strong focus on research driven process, risk and portfolio
management
were able to offer value-added services that were considered to potentially benefit BT investors.
Who is Putnam?
Founded in 1937, Putnam Investments Inc is the 4th largest mutual fund manager in the US and has more than 30 years experience of investing in global markets. Headquartered in Boston, Putnam has offices in London and Tokyo and was acquired by Marsh & McLennan Companies Inc. in 1970, although Putnam staff currently own 16% of the company.
Putnam has funds under management in excess of US$260 billion as at 31 August 2002 and employs over 300 investment professionals who are dedicated to wealth creation and management for its investors. This includes 170 equity analysts, of which 62 are assigned to the global core portfolios, making Putnam one of the few managers with a truly global perspective.
What is Putnam's investment style and philosophy?
How similar is it to BT's current style?
Frank Russell is satisfied that BT's GARP style is similar to Putnam's core style.
Putnam's Core Equity Group believes that all companies, no matter what they make or do, whether they are industrial companies or service companies, growth companies or cyclical companies, have an underlying long-term business worth.
Putnam observes that share prices fluctuate significantly around the business worth of each company and buy stocks that are selling significantly below this level.
Putnam believes their competitive advantage to be "core valuation." They value companies based upon their
understanding of their long-term cash return on investment. Before they invest in a company, they study the key variables that influence a company's cash return on investment and attach a hard valuation number to the underlying worth of the company. This hard valuation number enables them to determine the valuation upside from current price level and to compare stocks on a global basis across geographies and sectors. Putnam invests in companies with significant valuation upside. Putnam has no predetermined growth or value bias.
Putnam believes that the return and risk of any individual stock comes from three sources: country, sector, and company specific factors. The contributions from these three sources differ for each stock and will vary over time. Therefore, the Global Core Equity Team utilizes a seamless blend of "top-down" country and sector analysis and "bottom-up" valuation analysis in a three dimensional framework that involves picking the most attractive stocks within countries and across global sectors.
How does Putnam's performance compare?
The following table compares the performance of Putnam's Global Core Fund to the MSCI World Accumulation Index.
BT International Fund
Calendar
Year
MSCI World
Putnam Global Core
1995
25.90%
36.60%
1996
6.30%
10.80%
1997
41.10%
52.50%
1998
32.10%
27.00%
1999
17.10%
51.60%
2000
2.20%
7.00%
2001
-9.70%
-14.30%
8
mths to 31/08/02*
-22.58%
-21.46%
Source: Frank Russell, returns are in A$ and are before the
deduction of fees, expenses and tax. *Source: Morningstar. Putnam Global Core performance relates to the Sagitta Rothschilds - Core Global Fund. Performance is post-fees
and pre-tax and in A$.
What BT portfolios will Putnam manage?
Putnam will manage BT international share assets within our range of managed funds and superannuation portfolios, including the BT International Share Fund, BT's regional and sector funds, and international shares within our range of diversified portfolios.
How will this appointment benefit my BT investors?
We believe that the appointment of Putnam will benefit investors in a number of ways:
Your client's international portfolio will be managed by one of the world's most highly regarded investment managers with a strong track record of managing international shares.
These portfolios will continue to be managed consistent with BT's current investment style.
Putnam's exclusive arrangement with BT (including Sagitta and Westpac) in the Australasian market will
involve a high degree of commitment and resource. This will include permanent resource in Australasia
and the provision of value-add services (including the opportunity to collaborate across product development, investment management and client service).
How will the transition of BT's International Funds proceed from here?
After the close of the BT acquisition, we will move to transition BT's current International Shares portfolios to management by Putnam. To facilitate this, a transition manager has been appointed. The transition manager will have the responsibility of ensuring a smooth and efficient transfer of management to
Putnam. The appointment of such a manager is a regular occurrence in the wholesale market. We believe that this is a prudent appointment given the size of the mandate involved.
Important notes
The information contained in this presentation is given in good faith and has been derived from sources believed to be accurate at the date of issue. However neither BT Funds Management (BTFM) nor member companies of the BT Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way for errors or omissions. This material has been prepared specifically for the exclusive use of BTFM. This material is not to be published without BTFM's prior written consent. This material is not intended as promotional material and is not to be regarded as a securities recommendation. The information given in this presentation is a contribution to the overall research requirements of investors. This presentation or any statement is not
a replacement for professional advice.
