EUR 850.00 For Business Accounts Only

Morningstar | EV Updated Forecasts and Estimates from 01 Aug 2018

Eaton Vance has carved out a successful niche in the asset-management industry, providing equity and fixed-income investments to tax-sensitive clients. The company is also a leading issuer and manager of closed-end funds. Higher-than-average customer switching costs, a well-respected brand and reputation, and the ever-increasing size and scale of its operations should allow Eaton Vance to maintain its competitive positioning.That said, the road ahead may prove difficult, as the firm will face the aftereffects of the U.S. Department of Labor's fiduciary rule, which despite being left for dead by the current administration has already influenced the decision-making of broker/dealer and advisory platforms, which have become much more focused on fees and performance, and have been far more selective about the investment products that remain on their platforms. We expect this to pressure asset manager revenue and margins in the near to medium term, as firms like Eaton Vance have to adjust their fees to make retail fund offerings more competitive (especially relative to low-cost exchange-traded funds) while spending more to improve investment performance and enhance distribution.The best way for the U.S.-based asset managers to combat some of the pressures affecting their businesses from the shift in the power structure relative to third-party distributors, as well as the ongoing growth of passive investment products, is to tap into areas of the market that have potential for growth in assets under management and are less susceptible to these disruptions. We think that Eaton Vance is already ahead of the curve here, expanding its product set into implementation services and exposure management, which offer engineered solutions (alpha-seeking strategies, investment overlays, and customized benchmark tracking) and have been growing rapidly the past several years. While the firm has not benefited from the dramatic growth of ETFs during the past decade, we think that its exchange-traded managed fund platform is likely to provide it with a first-mover advantage in the next evolution of ETFs and mutual funds.