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Stronger Together: What Morgan Stanley’s Acquisition of Parametric Means for Our Clients

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Brian Langstraat, CFA

Chief Executive Officer

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Service, partnership, innovation, and customization—all the things you’ve come to expect from us—just got a big boost.

Back in October 2020, which in pandemic time feels like an eternity ago, Morgan Stanley Investment Management (MSIM) announced it was acquiring Eaton Vance. If you didn’t already know, Eaton Vance was Parametric’s parent company, and so the news meant that we too were part of the acquisition.

A large part, in fact: At the time of the announcement, Parametric’s assets under management of $316 billion represented 62% of Eaton Vance and its affiliates’ total AUM of $507 billion. Parametric’s market position and capabilities were clearly among the leading reasons MSIM pursued the deal. 

That deal has now officially closed, and while much has already been written about the acquisition in the financial press, I wanted to take a moment to share my thoughts directly with you on what the new combined entity will mean for our clients, for Parametric, and for the industry in general. 

What will change for our clients?

Very little. Crucially, the high levels of service, partnership, innovation, and customization you’re accustomed to getting from Parametric aren’t going anywhere—not now and not in the future. MSIM has been explicit in its commitment to Parametric’s brand, independence, and operating model. Our investment teams won’t change, and the groups that support them and our clients will continue to have the same core missions. This foundational independence has been a constant throughout our nearly 35-year history, regardless of corporate affiliation. 

For our clients—private clients, wealth managers, and institutions—the most meaningful part of the transaction is that an MSIM-owned Parametric is a Parametric with greater resources. MSIM’s scale and backing help us strengthen an already strong recruiting effort and continue to hire the best possible people. They help us further invest in our technology, operations, and new product development, all in the service of providing you with the best possible experience, whether that’s investment performance, portfolio reporting, or digital tools that support our interactions with you. We were already well along the path for these things. Now we’ll accelerate the journey.

What will change for Parametric?
Once the dust settles, the new MSIM will be a different firm in size and scope. What was a $715 billion company in AUM at the end of 2020 will be a $1.2 trillion entity in AUM as of the second quarter of 2021. Parametric is and will continue to be a large part of this new business.

The corporate functions at MSIM and Eaton Vance now have important work to do to reorganize in support of the newly combined firms. In the past we’ve relied on Eaton Vance for many crucial business support services, including legal, audit, employee benefits, and aspects of IT infrastructure. Now we’ll rely on MSIM for these services in similar but retooled ways. 

What really matters is found beyond the increased scale and corporate support, though. It’s that this partnership opens up new opportunities for us to continue to innovate and grow—just as we did after our combination with Eaton Vance in 2003. That partnership enabled us to spawn a business that grew to serve many of the largest North American institutional investors, expand into options-based strategies, and produce many new wealth management offerings. These are things that didn’t exist before—innovations that have helped our clients meet their investment goals. By supporting us in executing on these ideas, Eaton Vance played a huge role in helping Parametric grow from $4.5 billion in AUM to an over $358 billion company (as of the end of December) over the course of our 17-year collaboration.

MSIM understands that buying an investment management business isn’t like buying other types of businesses. Our chief assets aren’t factories or equipment—they’re our people and the investment strategies and underlying technology our people develop. To the extent MSIM is invested in our success, it’s invested in our people’s success, and MSIM’s management team has been vocal about not altering our organizational structure and making sure our employees are engaged and well cared for.

What does this combination say about the industry?

MSIM’s acquisition of Eaton Vance, and with it Parametric, is aimed at creating one of the most important money managers in the world—a firm that can succeed for clients and compete in an industry undergoing dramatic change. Customization, efficient implementation, transparency, and risk control are key considerations for all investors. Parametric has been and continues to operate in these key dimensions, seeing growth and opportunity in areas like custom or “direct” indexing, rules-based fixed income, transparent options strategies, flexible derivative overlays, and responsible investing. These capabilities are now important additions to an MSIM family known for high-conviction active strategies and compelling alternative offerings.

The bottom line

People ask me what most excites me about Morgan Stanley’s acquisition of Eaton Vance. As I hope I’ve illustrated here, I think it gives Parametric and our people an opportunity to more fully realize our collective potential—both the products we’ve created and the investment strategies we’re passionate about. This transaction isn’t about cost synergies or rationalization, as so many are. Instead it came about because, together with Morgan Stanley, we’re targeting the most exciting areas of investment management—innovative strategies that truly benefit clients. And that’s ultimately exciting for each and every Parametric stakeholder, whether you’re an advisor, investor, shareholder, or employee.

So I’m looking forward to moving past the details of the transaction and the integration and moving into the realization of meaningful new advancements. We’ve always been at the forefront of investing, and we’re about to get our biggest boost yet. I can’t wait for the next phase of our journey.

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The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Parametric and its affiliates disclaim any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Parametric are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Parametric strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results. All investments are subject to the risk of loss. Prospective investors should consult with a tax or legal advisor before making any investment decision. Please refer to the Disclosure page on our website for important information about investments and risks.