The Eaton Vance
] team has planned a strategic initiative
involving two affiliates — Parametric Portfolio Associates
(Parametric) and Eaton Vance Management (EVM
) — in an effort to strengthen the company’s rules-based, systematic investment strategies, customized individual separate accounts, and wealth management solutions.
| Matthew Joseph Witkos|
President of Distribution
"You can combine these investment strategies into one account and have it implemented by one provider," Matt Witkos
, president of Eaton Vance Distributors (EVD), told MFWire
. "If you want a customized balanced account, we can provide that. In an industry that is likely to see consolidation, you have already taken steps to consolidate your accounts in a way that now you are in a much better place to bring more scale into your business."
The initiative has three components: 1) Parametric and EVM's distribution teams will be integrated in the RIA and MFO market; 2) EVM's rules-based, systematic investment-grade fixed income strategies will be rebranded as Parametric, in addition to aligning internal reporting; and 3) Parametric and EVM's individual separately managed accounts (SMAs) will be combined under a single operating platform and technology.
"This initiative recognizes the extraordinary opportunity available for Eaton Vance to build on our leading positions in rules-based investing, individual separate accounts and specialty wealth management solutions," stated Tom Faust
, chairman and CEO of Eaton Vance. "By simplifying our brand architecture, strengthening our SMA operating infrastructure and expanding our distribution reach into the RIA and multi-family office marketplace, we expect to drive accelerated business growth for years to come."
The initiative only applies to the retail managed accounts and high retail clients, not institutional account businesses, Witkos confirmed with MFWire
. The initiative will be implemented over the remainder of 2019 and throughout 2020.
"Parametric is thrilled to add EVM's rules-based fixed income strategies to our systematic investment capabilities,” stated Brian Langstraat
, CEO of Parametric. "By combining these complementary strategies under the same branding and leadership, we expect to quicken the pace of innovation and further enhance the client service experience we provide."
As of April 30, EVM had $39.8 billion of systematically managed fixed income assets and associated annualized management fee revenue of $70.1 million, which will transfer from EVM to Parametric over a transition period. Parametric's managed assets are expected to increase to $285 billion, and its annualized management fee revenue is expected to grow to $462.1 million, which represents, respectively, 61 percent and 31 percent of Eaton Vance’s totals.
Under the new initiative, Parametric's Custom Core
benchmark-based separate account offerings will expand to include equity and fixed income securities, a variety of broad-market speciality indexes, and customized maturity-based and liability-driven portfolio benchmarks. Parametric separate accounts will provide the potential benefits of active credit oversight in fixed income.
In regard to the first of the three components under the new initiative, Eaton Vance will integrate the company's distribution teams serving the RIA/MFO markets into a single combined sales and service organization, in an effort to pool together the company’s investment strategies and solutions in order to better serve its clients. Through the integrated coverage model, Eaton Vance also hopes to address a number of challenges including managing risks, portfolio efficiency, investment taxes, portfolio concentrations, securing lifetime income, among others.
The new Parametric Eaton Vance Wealth Management Strategies (WMS
) group will combine Parametric's Wealth Management distribution team with the Advisor Services Group (ASG
) of EVD. The WMS group will be led by James Barrett
, managing director and head of client development at Parametric, who will report to Witkos. John Simchuk
, national sales director of Parametric Wealth Management, and David Michaud
, national sales director of ASG, will serve as co-national sales managers of the WMS group.
"Our broad lineup of wealth management strategies and services positions Eaton Vance and Parametric uniquely to serve RIAs, multi-family offices and their clients," stated Mr. Witkos. "By offering the full range of the firm's capabilities on an integrated basis across distribution channels, we further distinguish ourselves as the leading solutions provider for high-net-worth investors, a coveted market position."
EVM and Parametric will continue to maintain separate sales and service organizations that address the U.S. institutional market.
As the rules-based, systematic investment-grade fixed income strategies undergo a rebranding, EVM’s Tax Advantage Bond Strategies (TABS
) division and Quantitative Strategies (QS/) group, a sect of EVM Investment-Grade Fixed Income (IGFI), will both affiliate with Parametric. Further, the rules-based strategies managed by the two groups will be offered under Parametric.
James H. Evans, longtime director of EVM's TABS division, will join Parametric as CIO, fixed income, and will report to Langstraat. Thomas H. Luster, director of QS group, will join in the same role, reporting to Evans.
EVM's municipal and IGFI research teams will continue to provide credit research support to the TABS and QS strategies.
As of April 30, the TABS division managed assets of $33.9 billion invested in rules-based systematic investment-grade municipal and crossover tax-free/taxable bond strategies on behalf of individual and institutional separate account clients and fund investors. As of the same day, QS group managed $5.9 billion of assets invested in rules-based systematic investment-grade taxable fixed income strategies, serving individual and institutional clients and fund investors.
The last component of the initiative involves establishing a single technology and operating platform to support the individual SMA businesses of both Parametric and EVM, in an effort to increase operating efficiencies and anticipate growth within the SMAs.
As of April 30, Eaton Vance’s $138.5 billion of individual separate account AUM included $126.2 billion of individual SMAs directly managed by Parametric and EVM, which will be combined under the new operating platform and technology.
Eaton Vance and its investment affiliates currently rank as the largest manager of individual SMAs in the U.S., measured by client AUM, according to Money Management Institute and Cerulli Associates, with total managed assets of $113.4 billion as of December 31, 2018, and an active client roster of more than 80,000 accounts.
"The client feedback that I have gotten is that this makes sense, 'I totally get what you are doing.' There is positive reception internally and externally," Witkos said of the strategic initiative.
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