UPDATE 1-Putnam CEO says firm to offer hedge funds soon

*Putnam CEO says firm plans to offer hedge funds

*Firm will rely on in-house talent to run funds (Adds Reynold's quote, paragraph 4; byline)

By Svea Herbst-Bayliss

BOSTON, June 5 (Reuters) - Putnam Investments, a mutual fund company, plans to offer hedge fund portfolios in the next six to 12 months, its chief executive officer said on Friday.

"It is a business we would like to get into," RobertReynolds told a conference at Boston College. "Over the next six to 12 months you will see something from us."

Putnam's decision comes as many mutual fund firms are struggling to attract new investors after their assets shriveled during the financial crisis. Traditionally, mutual funds and hedge funds have been separate because mutual funds are closely regulated, while hedge funds are not.

"This will round out our product pallette, said Reynolds, who has brought in a string new top executives and managers since taking the top job about a year ago. "The company will take this decision to appeal to a different market segment."

Putnam sells its products through advisers who often serve wealthy investors, the type of people who are allowed to invest in hedge funds.

Hedge funds attracted wealthy investors, pension funds and endowments by promising to deliver better returns than mutual funds through techniques such as selling stocks short and using borrowed money, or leverage.

Running a hedge fund can be very lucrative for managers because these portfolios can charge both management and performance fees, while most mutual funds charge only management fees.

Reynolds said that Putnam expects to rely on managers it already employs to run these new portfolios and noted that a number of the people he brought in recently, like David Glancy, have experience in managing hedge funds.

Boston-based Putnam invests $102 billion and is a unit of Canadian insurer Great-West Lifeco Inc.

The $1.3 trillion hedge fund industry posted its worst returns ever last year, when the average fund lost about 19 percent. Mutual funds lost about twice that, industry data from Hedge Fund Research and Lipper Inc. show.

Pension fund investors expect to put fresh money into hedge funds at the end of this year, suggesting demand will revive after it sagged late last year, when investors pulled a record $150 billion out in the fourth quarter. (Editing by Andre Grenon)