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Eaton Vance Corp. Reports Operating Results (10-Q)

March 09, 2011 | About:
10qk

10qk

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Eaton Vance Corp. (EV) filed Quarterly Report for the period ended 2011-01-31.

Eaton Vance Corp. has a market cap of $3.79 billion; its shares were traded at around $32.12 with a P/E ratio of 23.8 and P/S ratio of 3.4. The dividend yield of Eaton Vance Corp. stocks is 2.2%. Eaton Vance Corp. had an annual average earning growth of 3.8% over the past 10 years.

Highlight of Business Operations:

Managed Asset Levels Average assets under management were $187.2 billion in the first quarter of fiscal 2011 compared to $160.0 billion in the first quarter of fiscal 2010, reflecting positive net flows and favorable market action. Growth in separate account assets, which earn lower fees on average than funds, contributed to a decline in our average effective fee rate to 66 basis points in the first quarter of fiscal 2011 from 67 basis points in the first quarter of fiscal 2010.

Operating Results In the first quarter of fiscal 2011, our revenue increased by $40.3 million, or 15 percent, from the first quarter of fiscal 2010. Our operating expenses increased by $24.6 million, or 13 percent, in the same period, reflecting increases in asset-based expenses that increase as assets under management increase, such as certain distribution and service fees, and increases in expenses that adjust to increases in operating earnings, such as the performance-based management incentives we accrue. The increase in our operating expenses also reflects an increase in our sales-related expenses, including sales incentives, which vary with the level of sales and the acquisition costs of new assets.

Recoverability of our Investments Our $296.8 million of investments consist primarily of positions in Eaton Vance-managed funds and separate accounts entered into for investment and business development purposes. These investments are generally in liquid debt or equity securities and are carried at fair market value. We test our investments, including our investments in non-consolidated collateralized loan obligation (CLO) entities and investments classified as available-for-sale, for impairment on a quarterly basis. Our investments in non-consolidated CLO entities, which have been the subject of past impairments, totaled $1.2 million on January 31, 2011. We evaluate our investments in non-consolidated CLO entities and investments classified as available-for-sale for impairment using quantitative factors, including how long the investment has been in a net unrealized loss position, and qualitative factors, including the underlying credit quality of the issuer and our ability and intent to hold the investment. If markets deteriorate during the quarters ahead, our assessment of impairment on a quantitative basis may lead us to impair investments in non-consolidated CLO entities or investments classified as available-for-sale in future quarters that were in an unrealized loss position at January 31, 2011.

Assets Under Management Assets under management of $191.7 billion on January 31, 2011 were 19 percent higher than the $161.6 billion reported a year earlier, reflecting improving securities prices and strong open-end fund and institutional net inflows. Long-term fund net inflows of $11.3 billion over the last twelve months reflect $12.3 billion of open-end fund net inflows and $0.6 billion of closed-end fund net inflows offset by $1.6 billion of private fund net outflows. Gross outflows from private and closed-end funds include net reductions in fund leverage of $0.7 billion in the last twelve months. Institutional separate account net inflows were $4.1 billion, high-net-worth separate account net inflows were $0.2 billion, and retail managed account net outflows were $0.6 billion. Market price appreciation, reflecting recovering equity and income markets, contributed $15.8 billion to growth in managed assets, while a decrease in cash management assets reduced assets under management by $0.7 billion.

Separate account net inflows totaled $0.5 billion in the first quarter of fiscal 2011 compared to net inflows of $1.6 billion in the first quarter of fiscal 2010. Institutional net inflows totaled $0.5 billion in the first quarter of fiscal 2011 compared to $0.4 billion in the first quarter of fiscal 2010, reflecting gross inflows of $2.2 billion and $1.6 billion in the first quarter of fiscal 2011 and 2010, respectively, net of redemptions of $1.7 billion and $1.2 billion, respectively. High-net-worth net inflows totaled $0.2 billion in the first quarter of fiscal 2011 compared to $0.6 billion in the first quarter of fiscal 2010, reflecting gross inflows of $0.8 billion and $1.1 billion in the first quarter of fiscal 2011 and 2010, respectively, net of redemptions of $0.6 billion and $0.5 billion, respectively. Retail managed account net outflows totaled $0.1 billion in the first quarter of fiscal 2011 reflecting gross inflows of $1.6 billion net of redemptions of $1.7 billion. Retail managed account net inflows totaled $0.5 billion in the first quarter 2010, reflecting gross inflows of $1.7 billion net of redemptions of $1.2 billion. Retailed managed account redemptions in the first quarter of fiscal 2011 reflect residual redemptions of $0.2 billion in Parametric Portfolio Associates retail managed account overlay assets as a result of the integration of Bank of Americas retail managed account program into the Merrill Lynch retail managed account program following Bank of Americas 2009 acquisition of Merrill Lynch. Unlike the former Bank of America program, the Merrill Lynch retail managed account program does not currently utilize outside overlay managers.

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