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Friday, October 21, 2016

Eaton Vance Is Buying Calvert, and Here's Why

Reported by Neil Anderson, Managing Editor

Boston, Massachusetts-based Eaton Vance [profile] is about to buy the business assets of Bethesda, Maryland-based Calvert [profile] from Ameritas, and here's why.

Vishal Khanduja
Senior Vice President, Lead Portfolio Manager, Head of Taxable Fixed Income
Tom Faust, chairman and CEO of Eaton Vance, unveiled the deal this morning. Faust tells MFWire that the deal was in the works for "a number of months."

"We've been in conversations since early 2016," Faust says, adding that growing demand for "responsible investing" (Calvert's term; ESG, SRI, and impact investing are other related terms in the industry) is "one on the short list of positive trends in our business."

Faust says that Calvert has two key things that Eaton Vance doesn't have: "a brand that stands for responsible investing" with a history in the space; and "a dedicated research team that's focused on this type of analysis," which is complete with "a full range of strategies on the responsible fixed income side," as well on the equity side.

Tom Faust
Eaton Vance
Chairman and Chief Executive Officer
As such, Faust says, he plans to keep the Calvert brand alongside Eaton Vance's four other principal brands: Atlanta Capital, Hexavest, Parametic, and Eaton Vance Management itself.

"The Calvert Funds will continue to be branded as Calvert. They will have a separate board of directors from other funds within the Eaton Vance family of companies," Faust says.

John Streur, president and CEO of Calvert, "will take that same role in what we call the new Calvert," Faust says. And Vishal Khanduja, senior vice president, lead PM, and head of taxable fixed income at Calvert, will also stay on after the deal.

"He is also joining Eaton Vance ... effectively continuing to lead that team," Faust says, adding that "on the equity side, some staff members will join the team, too."

Yet some of Calvert's current employees (about 95 in total currently) will not be joining.

"Substantial job eliminations are likely, particularly after a transition period," Faust says. "I can't give a specific number."

One of Eaton Vance's affiliates, Atlanta Capital, has subadvised a big Calvert fund since 1999.

"So we know this company and have an ongoing relationship," Faust says. "We've gotten to know John Streur pretty well."

"We're taking a relatively small company by our standards, though they're a significant player here, and we're looking to help them grow by bringing Eaton Vance's resources to bear," Faust adds. "[Calvert has] effectively been a subscale, standalone investment operation and we're merging it into our own, a full-scale business."

Watch for Calvert's investment, marketing, operations, and sales efforts to be integrated into Eaton Vance's own.

"Though there will continue to be some dedicated Calvert distribution resources, and there will continue to be a dedicated Calvert research team focused on sustainability analysis," Faust says.

As for making more acquisitions, Faust notes that Eaton Vance has "made a practice of doing regular acquisitions."

"We have benefited greatly as a company from that activity," Faust says.

"We continue to look. We believe that there will be more consolidation in our business," Faust says, pointing to "the pressures on small firms to comply with a growing regulatory burden, ... to gain and maintain shelf space in an increasingly competitive distribution marketplace." 

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