Steep losses on both stock and bond funds this year have investors heading for the exits. As a result, mutual funds are laying off portfolio managers, and, in some cases, merging funds.

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Steep losses on both stock and bond funds this year have investors heading for the exits. As a result, mutual funds are laying off portfolio managers, and, in some cases, merging funds. Indeed, fund mergers spiked in 2001, the second year of the last bear market.

BlackRock, Fidelity and American funds are reducing staff, and Putnam Investments recently eliminated 12 portfolio managers, merging six mutual funds into larger ones. Allianz recently merged the Global Investors Value fund (PDLAX) with its NFJ Large Cap Value (PNBAX).

Bill Ding, assistant professor of finance at State University of New York at Albany, who has studied more than 30 years of fund mergers, says most are aimed at eliminating small or underperforming funds and bolstering stronger ones. The goal is to keep investors from fleeing for a rival firm.

He expects more mergers as assets shrink. Larger mutual funds cost less to run and may offer lower fees. This year through October, more than $100 billion has flowed out of mutual funds, excluding funds of funds, according to Morningstar.

The Associated Press