Eaton Vance Deal Complements Morgan Stanley's Lineup
The deal combines two companies with Average Parent ratings.
Morgan Stanley (MS) announced that it will acquire Eaton Vance (EV), a deal that is expected to close in 2021's second quarter. This news doesn't immediately affect Morgan Stanley's Average Parent rating or any strategy's Morningstar Analyst Rating.
Morgan Stanley Investment Management will get a big boost in assets under management. Its $665 billion will grow to $1.2 trillion under current asset levels, fulfilling Morgan Stanley CEO James Gorman's previously stated desire to get the business to the $1 trillion mark. The company's asset-management strategy has come full circle. This deal comes 11 years after it sold its Van Kampen lineup to Invesco in the aftermath of the global financial crisis, a move that later seemed shortsighted.
MSIM previously hinted that it would be open to making acquisitions, particularly in areas in which it lacked scale or capabilities. It achieves that goal with this deal. Morgan Stanley has long tried to raise its profile on the fixed-income side. It hired BlackRock veteran Brian Weinstein in 2018 to lead the effort, and Julie Callahan joined from Pimco in June 2020 to build out a municipal-bond business. The Eaton Vance acquisition will more immediately and directly fill holes in its fixed-income lineup, particularly on the municipal- and high-yield bond front.
MSIM will gain Eaton Vance's Calvert franchise, an established environmental, social, and governance firm. Morgan Stanley only recently started to boost its ESG efforts as investor interest intensified, hiring Emily Chew as global head of sustainability in March 2020.
Meanwhile, Eaton Vance's Parametric unit focuses on tax management and customizable separately managed accounts, both areas in which MSIM isn't heavily involved.
While the acquisition complements Morgan Stanley's lineup, it brings together two parents that Morningstar rates as Average. MSIM's crown jewel is its Counterpoint Global team, which runs concentrated growth equity strategies, and there are some pockets of strength within international equity and real estate. Of the 44 share classes that Morningstar covers in the United States, 32% are rated Silver, 36% Bronze, and 32% Neutral. Eaton Vance's ratings picture is less favorable. Of the 90 share classes rated in the U.S., 1% are Silver, 20% Bronze, 61% Neutral, and 18% Negative.
Branding decisions and plans for lineup consolidation are unclear at this point.
Katie Rushkewicz Reichart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.