EV
#I think I got all that, but let me just, let me make sure.
So first on NextShares and where that fits in with the pricing on mutual funds, there is an important linkage there that I think as probably most of the people on the call understand, there is a significant change that seems to be happening likely happening in connection with the either current or possibly delayed implementation of the DOL fiduciary rule, which is C shares, clean shares, other types of fund pricing.
How NextShares fit into that is that we have, or anyone has with NextShares, the ability to offer those with pricing determined by the individual broker-dealer.
It is subject to NextShares or subject to what is called 22D relief which also applies to ETFs.
So NextShares will be the only proprietary actively managed strategies offered on the basis where broker-dealer A can have their own pricing schedule, separate from broker-dealer B all operating in the same basic structure.
That's---+ and not subject to the somewhat narrow terms of that clean shares relief.
So that is very much a part of the conversation with NextShares and I would say some of the delay we have had and frankly frustration we have experienced with the pace of NextShares' uptake has been related to this uncertainty about pricing trends in the industry and where NextShares fits into that.
So we think on balance those things helpful.
Change is helpful.
Uncertainty is not helpful.
Because uncertainty interferes with decision-making and we're looking for broker-dealers and fund sponsors to commit to NextShares as an important part of their future product lineup in pricing.
In terms of specific conversations with broker-dealers, obviously we cannot comment on that.
I would say that we are, we continue to have advanced discussions with all types of major broker dealers.
The main act for us currently is UBS, which announced last summer that they intend to offer NextShares and have really followed through on making it clear to the marketplace that this is an important initiative for them and they're hoping to do a broad launch of NextShares through the end of the year or by the end of the year.
We now have, as I mentioned, eight NextShares funds in the marketplace and with UBS's support, we certainly expect to have a multiple of that by the end of the year.
Yes.
I think that our strategy is that we tier our application of our capital as we move through each quarter and it's a series of independent decisions.
But our first priority is always to use our cash to actually grow the Company organically.
And to the extent that we have opportunities, like we saw with Calvert, we are first one going to deploy our resources in those types of directions and we'll continue to look for those types of opportunities.
Second is to maintain our dividend; we feel strongly about our position as a solid dividend company and we want to make sure that we do not do anything that jeopardizes that.
And then third, to the extent that we see an opportunity and we feel like we have got cash flow that makes sense for us to be in the market, we're in the market, to the extent that we see an opportunity to lean in, we lean in.
If we look at the stock price and we think that we need to think about it a little bit more carefully, we might pull back.
So I think that the foremost consideration is always, can we actually deploy our resources to actually grow the Company, and I think that we obviously did that this quarter and are really pleased with what we did with Calvert.
It varies by the different businesses and exposure management, the other significant player in that is Russell Investments who has a competitive product offering.
There are some other entities primarily coming out of the custody bank world that either have currently or have in the past competed in that marketplace.
But it's a relatively small number of competitors.
For the larger institutions, we also compete against the potential of doing it in-house, which is an option that at the high-end would certainly be competitive with what we do.
Maybe the most significant competitor is that and certainly the other competitor is not doing this, not doing this at all.
This is a voluntary thing where we have to sell people on the concept that by managing cash and managing exposures more efficiently and more tightly, they can more than make up for the incremental cost of employing this service, which certainly the longevity of the client relationships that we've had suggest that that's a pretty easy sell for people that know and understand this product.
On the custom beta site, competition varies a little bit.
We have one group of competitors on the laddered muni side or laddered corporate side, firms like Nuveen are active in that, players in the retail managed account business.
In terms of Parametric's custom core strategy, probably the biggest competitor is a firm [base insurance is so] called Aperio, which has a competitive offering.
But there's, we think a unique advantage that accrues to us is having this comprehensive capability that goes across equity and income.
And also with the addition of Calvert now into Eaton Vance, gives us the ability to do things in terms of responsibly managed, separately managed accounts and associated customization and impact activity that we can do and impact reporting that we can do that really sets us apart from everyone else that's active in this marketplace.
But the key for us in growing that business has been, first, broadening distribution to encompass a broader range of strategies offered through more intermediaries.
And second, really filling out the product line and the enhancing the service offering over time.
All of these things required a pretty significant investment in technology and infrastructure to accommodate what are literally tens of thousands a separate accounts that we manage in this business.
Thank you.
I do not have an estimate.
The vast majority of that would be custom beta.
That is really the growth driver of our high net worth business at the moment.
And that would be, just as a reminder, Parametric has a separate sales force for the high net worth channel that calls on family offices, multifamily offices, and high-end registered investment advisors.
And that's the primary driver for that business.
Eaton Vance also has what we call an investment counsel business that's experiencing modest growth currently, but the primary grower within the high net worth category is through the Parametric wealth management channel and specifically the custom beta products.
Yes.
Between the tax management and nontax managed version of custom core, you have got close to $3 billion of net inflows in this quarter.
So that was coming up through the high net worth channel.
I think it ---+ a lot to be seen in the details of those proposals.
If the only change is a lowering of tax rates, I think that would not make a lot of difference in this business.
Obviously if tax rates get cut in half, that's one thing, but if the top tax rates goes from 39.6% to, I believe the proposal is 33%, maybe that would have a marginal impact.
But I do not think it is a huge impact on our business.
If there are other changes of a structural nature, that potentially could have a bigger impact.
So we're watching carefully to see what happens with text reform.
Like a manifold effect on our ---+ like many, like probably most corporations a large and varied effect on our business, there is an overly positive that would come from a lowering of corporate tax rates just because Eaton Vance pays such a high tax rate currently.
But in terms of impact on our business, I know the asset management industry is concerned about the possibility of things like changing the tax treatment of municipal bonds, changing ---+ changes in the incentives for retirement of employer-sponsored retirement plans.
All those things to be potential negatives that we are going to have to see how they play out.
But there's nothing out there specifically that concerns us related to our custom beta business, but we are monitoring it closely.
