EUR 850.00 For Business Accounts Only

Morningstar | Rebound in equity markets the past few months should improve Eaton Vance's fiscal 2019 results.

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. We continue to believe there will be room for active management, even as an overwhelming majority of investor flows go into index funds and exchange-traded funds, believing that the advantage when it comes to getting placement on platforms will go to active asset managers that have greater scale, established brands, solid long-term performance, and reasonable fees.With $423.1 billion in managed assets at the end of December, Eaton Vance has the size and scale necessary to be competitive in the industry. The company's AUM is fairly diverse, composed of equity (26% of AUM), fixed-income (19%), floating-rate bank loan (10%), alternative asset (2%), 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 (41% of AUM), responsible for managing active equity, income and alternative strategies across a range of investment styles, and Parametric Portfolio Associates (51%), managing a range of engineered alpha strategies and providing portfolio implementation services.During the past five (ten) fiscal years, Eaton Vance's organic growth rate averaged 5.6% (5.2%) annually with a standard deviation of 3.7% (4.6%), which was significantly better than active managers as a whole, which generated negative 1.7% (negative 0.7%) average annual organic growth during 2014-18 (2009-18) with a standard deviation of 0.4% (1.2%). While we expect the headwinds for the asset managers to be stiff as we move forward, we continue to believe Eaton Vance can generate 1%-2% average annual organic AUM growth, with slightly lower levels of revenue growth and declining margins on average during fiscal 2019-23.