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From a recent Morningstar article called "What your fund company isn't telling you":

Eaton Vance, Fourth-Quarter Earnings Call | Nov. 22, 2005

What the fund company said: "As we have mentioned in prior calls, our focus on closed-end funds does redirect some of our sales and marketing efforts from our open-end funds. However, the very attractive financial characteristics of closed-end funds, low cost per dollar of assets raised, and lack of redemptions suggest to us that this is a very favorable and rational business trade-off. As you know, retaining assets is an important component of profitability in the asset-management business. One of Eaton Vance's many strengths is our lower-than-average fund redemption rate."

Our Comment

Eaton Vance has been one of the leaders in the resurgence of closed-end funds in recent years. So why does the firm like the format? Because it's better for investors? Nope. Because investors can never redeem their money from closed-end funds, so the fund company can earn fees on the assets in perpetuity (investors can trade with each other over an exchange, but the original investment remains with the fund). Oh, and they're cheap to launch.
Eaton Vance also deserves special mention for illustrating a common practice in fund company conference calls: focusing on the firm's growth and profitability with barely a word about how shareholders of its funds have fared. The best companies talk about the investment performance of their funds, and how this has helped or harmed their business, but Eaton Vance's management barely even refers to fund performance in their opening remarks. They do, however, note how extraordinarily well their stock has done.

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