Globe 100

No. 1 finance company

Eaton Vance: Rising tall in a tough year

It grew as financial firms fought to emerge from bad times

Thomas E. Faust Jr., Eaton Vance CEO
Yoon S. Byun/Globe Staff
Thomas E. Faust Jr., Eaton Vance CEO

WHAT CAN YOU SAY about a year that placed your company at the top of its industry on the Globe 100, and made it the 13th best-performing Massachusetts public company in 2011?

If you’re the boss at Eaton Vance Corp., it was a mixed bag.

“I think about our performance last year as being decent, but not stellar,’’ said Thomas E. Faust Jr., Eaton Vance’s chief executive.


It was good enough to come out far ahead of the pack. In 2011 - a tough year for financial firms - the Boston-based mutual fund company had $1.2 billion in revenue, up 7 percent from the previous year. It also had $225 million in net income in 2011, up 36 percent despite the choppy market environment.

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Still, Eaton Vance did not meet an important annual goal: to grow assets by 10 percent. Instead, the firm grew by 2 percent, and now has $197 billion in total assets.

Eaton Vance’s revenue and earnings gains can in large part be traced to some new funds it has rolled out, as well as to gains in emerging markets and in its floating-rate bank loan funds. Those wins helped offset the loss of assets in other areas.

Part of the problem was industrywide. Nationally, investors were scared away from municipal bond funds, due to fears about potential failures that never came to fruition.

Eaton Vance also had performance problems in its Large-Capitalization Value Fund, which spurred customers to cash out $4.7 billion.


“It was par for the course’’ to lose some assets in the value fund, said Greggory Warren, a senior stock analyst at Morningstar Inc., an investment research firm in Chicago. “It was poor performance combined with complete indifference of investors’’ toward stock funds.

The value fund had a 16.5 percent average annual return over the past three years, vs. 22.8 percent for the benchmark Russell 1000 Value Index.

“We have a short-term performance hole that we’re trying to address,’’ Faust said, by focusing on improving investment performance.

Warren sees this year shaping up well for Eaton Vance, particularly if taxes increase. That would drive investors to municipal bond funds, a large business for the firm, and to tax-managed funds. “They’re pretty well positioned in a niche that not a lot of other players are in,’’ he said.

Meanwhile, Eaton Vance shares fell 20 percent last year, roughly in line with other financial stocks, which were battered by global worries about European debt. Broader stock indexes, such as the Standard & Poor’s 500 Index, ended the year flat.


Faust said the firm, which has more than 1,157 employees, including 842 in Massachusetts, is devoting resources to developing new products. For instance, it’s trying to attract muni bond customers by offering to manage their holdings in individual accounts, at lower fees than they might pay a broker.

Eaton Vance also is looking to create a product called exchange-traded managed funds, a hybrid between mutual funds and exchange-traded funds, known as ETFs. The idea, Faust said, is to offer transparency and ease of trading, without having to disclose stock holdings each day.

The Securities and Exchange Commission would have to approve the model. “The challenge, of course,’’ said Faust, “is to convince the regulators, and the marketplace.’’

Beth Healy can be reached at