Morgan Stanley’s agreement to buy asset manager Eaton Vance for $7 billion is just the latest example of increasing consolidation in the financial services industry, several industry analysts say. Still, the development did catch them off guard.
“That Eaton Vance was willing to sell was a surprise to us as we have viewed the company as one of the better positioned traditional managers given its customized portfolio business [Parametric], ESG business through Calvert and diversified fixed income, franchise, including other strategies,” said Keefe Bruyette & Woods analysts Robert Lee and Jeffrey Drezner, in a note.
“We did not expect to see a more traditional asset manager like narrow-moat-rated Eaton Vance being taken out by one of the investment banks … ,” explained Morningstar sector strategist Greggory Warren. (Morningstar defines narrow moat companies as ones that can fend off competition for as long as 10 years.)
The investment banks “have been far more focused on their brokerage and wealth-management businesses the past decade, with some even shedding their asset-management units in the aftermath of the 2008-09 financial crisis,” Warren said.
Morgan Stanley’s plan to buy Eaton Vance comes just days after the firm finalized its $13 billion acquisition of discount brokerage E-Trade and Schwab completed its $22 billion acquisition of TD Ameritrade.
Also recently, Trian Fund Management took a 9.9% stake in both Invesco and Janus Henderson with the hope of merging the two firms to better compete against giant asset managers like BlackRock.