Eaton Vance, known mostly for its retail mutual funds, is laying the groundwork for a push into the crowded institutional investor market, company executives say.
"We have a mandate to expand Eaton Vance's institutional business," said Lisa Jones, the new head of institutional for the Boston investment management company. She oversees institutional marketing, sales, consultant relations, and client service for a business line that currently manages about $4 billion of assets.
Ms. Jones, who was the president of Massachusetts Financial Services' institutional business until September, said she will initially hire a marketing executive and a request-for-proposals writer. Within less than a year, she said, the unit will be knocking on the doors of consultants who can determine what products are presented to pension fund, foundation, and other institutional clients.
The message she will pitch to consultants includes elements like Eaton Vance's performance, stability, and disciplined investment strategy, said Thomas E. Faust Jr., an executive vice president and the chief investment officer. The company also may have a wedge in the fact that it has been untouched by the regulatory scrutiny that has roiled customer relationships elsewhere, Ms. Jones said.
Ms. Jones is respected for her work at MFS as head of mutual fund distribution through banks, said Burton Greenwald, a mutual fund consultant at BJ Greenwald Associates in Philadelphia, and later as president of the institutional division. She joined the institutional side as head of distribution in 1999, when assets were $18 billion; they now stand at $47 billion.
The institutional market is already crowded with money managers, including many of Eaton Vance's Boston neighbors. Ms. Jones said she is well aware that her company has its work cut out.
But one factor the company is counting on to smooth its entry into the business is the regulatory trouble that some institutional managers have encountered. "Many large companies have been challenged by the regulatory environment, and that has caused a lot of consternation at the pension fund level," she said.
Putnam Investments in Boston, though she did not name it, is well known to have been hit hard by customer runoff in the wake of charges in October 2003 that it allowed improper trading in its mutual funds, and the broader money management industry has suffered as well. Putnam underwent a management shakeup in which its chief executive was purged and half of its 50 highest-paid executives left the company. It has worked strenuously since then, and with some success, to win back customers.
Other major companies in Boston, including Fidelity Investments and State Street Corp., averted being charged. MFS, Ms. Jones's former company, was not one of them, however. In late 2003 the Securities and Exchange Commission started an investigation into suspected improper fund trading that led to a $225 million settlement which included punishment for the company's CEO and its president.
"The culture of our company makes it appropriate for a larger institutional presence," Mr. Faust said. "What we are and what we stand for is very compatible with what an institutional investor wants."
Another selling point, Ms. Jones said, is the client-service nimbleness that she said comes with Eaton's relatively small size - $98 billion of assets under management. "There is an opportunity for a new, smaller entity to create its own brand and provide terrific client service," she said.
Mr. Greenwald said that a clean record is a good start. "It's certainly a plus, but it's not going to be a decisive factor," he said.
Building relationships with consultants will be crucial, he added, and Ms. Jones was a good pick for the job. "Lisa Jones is a very capable lady, very professional and knowledgeable," he said. "What she has to develop is some way to differentiate Eaton Vance's resources and institutional strengths."
Eaton Vance is not new to the institutional business - the 81-year-old company has had such clients from the start. But it has focused for many years on selling mutual funds to wealthy people.
Institutional assets handled by the company's investment management side total about $4 billion, Mr. Faust said. About $3 billion of that is in securitized bank loans, he added, and this segment has more than doubled in the past two years.
The company is not yet saying which additional products it will make available to institutional investors. But Mr. Faust said the same money managers who have compiled good track records in areas like large-cap value equity mutual funds will manage institutional accounts as well. "It's a different platform but the same team and philosophy," he said.
The institutional drive is part of Eaton Vance's effort to "diversify the business so we're not totally dominated by the fund business," said Mr. Faust. Three-quarters of the company's assets under management are in mutual funds.
