While it doesn’t have immediate or direct implications for actively managed exchange traded funds, Morgan Stanley’s $7 billion acquisition of mutual fund manager Eaton Vance underscores the point that active management is still desirable on multiple fronts.
Eaton Vance has some experience with actively managed exchange traded funds, previously listing some products under the NextShares label.
“Morgan Stanley (ticker: MS) expects to break even on an earnings-per-share basis immediately after the Eaton Vance (EV) deal closes in 2021, and expects the transaction to be “marginally accretive” to earnings after cost savings of $150 million, or 4%, of Morgan Stanley Investment Management’s and Eaton Vance’s combined expenses,” reports Leslie Norton for Barron’s.
With new active product offerings that retain the tradability factor of ETFs, but without disclosing holdings vis-à-vis mutual funds, will these funds attract the interest of investors? More importantly, their capital?
A New Generation of Active ETFS
A new generation of active ETFs are constructed similarly to flagship investment strategies that have served fund family clients well for decades, the active ETFs use the same portfolio managers as their corresponding mutual funds and employ the firm’s long-standing strategic investing approach, characterized by rigorous research, risk awareness, and independent decision making. This could be an area of growth in which Morgan Stanley can leverage the Eaton Vance purchase.
“Morgan Stanley was attracted by Eaton Vance’s strong relationships with wealth managers; its swiftly growing Parametric operation, which provides customization solutions for portfolios, indexes, and separately managed accounts; its Calvert sustainable investments operation; and other strong-performing investment management operations,” according to Barron’s.
There are other perks in the deal for the buyer.
“Morgan Stanley will be able to distribute Eaton Vance’s products through its wealth-management, institutional, and international platforms. After the deal closes, the bank said, it will have the largest wealth and investment management platform in the world, with $26 billion in annual pro forma net revenue,” notes Barron’s.