Eaton Vance Flags New Warning Ahead of Morgan Stanley Acquisition
Wealth manager warns activists could negatively impact the fees it earns from closed-end funds.
January 3, 2021
In what’s likely to be its final 10-K as an independent company, Eaton Vance (EV), which is being acquired by Morgan Stanley, is citing an important new risk. In its 2019 10-K, Eaton Vance acknowledged potential risks to its closed-end funds that could reduce fee revenue:

“While not subject to daily redemption, closed-end funds that we manage may shrink in size due to repurchases of shares in open-market transactions or pursuant to tender offers, or in connection with distributions in excess of realized returns.”

In its 2020 10-K, Eaton Vance adds language to this risk factor and hints that activist investors may be targeting its closed-end funds:

“While not subject to daily redemption, closed-end funds that we advise may shrink in size due to repurchases of shares in open-market transactions or pursuant to tender offers, or in connection with distributions in excess of realized returns. Activist shareholders have through various means sought, and may continue to seek, to force certain closed-end funds for which we serve as investment adviser to conduct a share tender offer, convert to an open-end fund, liquidate or take other actions that would reduce or eliminate the fees we receive for managing such funds.”
Related: MS
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