Eaton Vance (EV) announced Friday that it would acquire Calvert Investment Management, the $12.3 billion Bethesda, Maryland, social investment manager, for an undisclosed sum.
Calvert, one of the first fund complexes to concentrate on environmental, social and governance issues, was founded in 1976. Despite an early start in the ESG area, however, it has struggled to gain assets, even though the bulk of its 20 funds with five-year records have above-average returns for their Morningstar categories. Its largest fund, Calvert Equity A (CSIEX), has $2.2 billion in assets.
Calvert recently paid a $3.9 million penalty to settle charges from the Securities and Exchange Commission for overstating the value of some of its bond funds for several years. Calvert misvalued some of the bonds in its funds between March 2008 and October 2011.
For Boston-based Eaton Vance, which has $343 billion in assets, the acquisition means a large step into the ESG market. “As part of Eaton Vance, we see tremendous potential for Calvert to extend its leadership position among responsible investment managers,” said Thomas E. Faust Jr., Eaton Vance's CEO. “By applying our management and distribution resources and oversight, we believe Eaton Vance can help Calvert become a meaningfully larger, better and more impactful company.”
For Calvert, the purchase could bolster their sales and distribution. “I am extremely pleased that Eaton Vance has chosen to make Calvert the centerpiece of its expansion in responsible investing,” said Calvert CEO John Streur. “By combining Calvert's expertise in sustainability research with Eaton Vance's investment capabilities and distribution strengths, we believe we can deliver best-in-class integrated management of responsible investment portfolios to investors across the U.S. and internationally.”
“In this competitive environment with pressure on fees, companies are looking for scale,” said Bridget Hughes, director of parent research at Morningstar. “This gives them the ability to raise assets and, potentially, lower fees.”
What's in it for Eaton Vance? The company has been made purchases of boutique managers from time to time, such as its 2001 purchase of Atlanta Capital and its 2003 acquisition of a majority stake in Parametric Portfolio Associates. And demand for ESG funds is heavier overseas, but demand for Eaton Vance's bread-and-butter tax-managed funds is not, said Ms. Hughes.
Completion of the deal requires approval by Calvert shareholders. Eaton Vance stock was essentially flat Friday morning as the Dow Jones industrial average fell more than 100 points.