EUR 850.00 For Business Accounts Only

Morningstar | Eaton Vance continues to trade strong organic growth for lower fees and limited base fee growth.

A confluence of several issues--poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel--has made it increasingly difficult for asset managers running predominantly active portfolios to generate organic growth, leaving them more dependent on market gains to increase assets under management. While we continue to believe there will be room for active management, which is hard to do in an environment where an overwhelming majority of the flows are going into index funds and exchange-traded funds, we believe the advantage when it comes to getting placement on platforms will go to asset managers that have greater scale, established brands, solid long-term performance, and reasonable fees.With $453.2 billion in managed assets at the end of July, Eaton Vance has the size and scale necessary to be competitive in the industry. The company's AUM is fairly diverse, composed of equity (27% of AUM), fixed-income (17%), floating-rate bank loan (9%), alternative asset (3%), and money market funds, as well as assets managed under its implementation services (25%) and exposure management (18%) platforms. Most of the company's AUM is split between Eaton Vance Management (40% of AUM), responsible for managing active equity, income and alternative strategies across a range of investment styles, and Parametric Portfolio Associates (52%), managing a range of engineered alpha strategies and providing portfolio implementation services.During the past five (ten) calendar years, Eaton Vance's organic growth rate averaged 7.2% (5.5%) annually with a standard deviation of 4.6% (4.5%), which was better than the industry, which generated negative 0.6% (positive 0.7%) average annual organic growth with a standard deviation of 2.1% (3.1%). While we expect the headwinds for the asset managers to be stiffer as we move forward--we even incorporate a major equity market decline midway through our five-year forecast--we continue to believe Eaton Vance can generate 1%-4% average annual organic AUM growth, with similar levels of revenue growth and slightly lower margins on average during 2018-22.