Summary
- A diversified asset management firm across funds and strategies.
- Steady growth in assets under management and earnings.
- Mixed results in fund performance.
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The single greatest edge an investor can have is a long-term orientation. - Seth Klarman
Increased market volatility can provide great opportunities, as well as risks, for assets managers. Eaton Vance (EV) is an asset management firm offering various strategies across equity, fixed income, and multi-asset investment mandates.
EV holds assets across an assortment of open-end and closed-end funds as well as institutional and individual separate accounts. EV is diversified across both investment mandates and vehicles with no large concentrations of assets in any one line.
Recent performance
Total assets under management for the most recent quarter (ending July 31, 2020) of $507.4 billion were up 5% year-over-year, comprised of 2% net inflows and 3% price appreciation. Average annualized management fee rates fell year-over-year across multiple investment mandates in the most recent quarter, resulting in a 5% drop year-over-year to 30.3 bps. While it is constructive to see further net inflows, only a 3% price appreciation and a decline in fees suggest EV is not overwhelmingly benefiting from increased volatility in the current market environment.
EV's mutual fund performance quartile rankings are favorable over the long term. Based on 5 Years of performance, EV has an impressive 43% of funds in the 1st quartile. The remaining funds are 23% in the 2nd, 24% in the 3rd, and 10% in the fourth quartile. However, looking at one year of performance, we see only 19% of funds in the 1st quartile, 27% in the 2nd, 15% in the 3rd, and a disappointing 39% of funds in the 4th quartile. New investors may be cautious to invest in funds that may have stumbled over the short term, though hopefully, the firm's management can return to longer-term success.
Yet, earnings continue to plod along. Adjusted earnings per share for the recent quarter were $0.82, up from $0.80 sequentially, and down from $0.88 in the prior year's quarter.
Adjusted earnings for the recent quarter ending July 30, 2020, exclude a $100.5 million impairment loss on EV's investment in affiliate Hexavest, a boutique investment manager. Hexavest has been experiencing net outflows for the past two years, increasing in 2020. After the impairment, the carrying value of the investment remains at $32.7 million.
