Eaton Vance has opened an office in London with John Redding, v.p. and portfolio manager, spearheading the effort. Since entering the European market at the start of the year, Eaton Vance has acquired approximately $500 million of European assets through both the primary and secondary markets.
"We had been talking to people in the market and liked what we saw in deal flow and deal quality," said Redding. "We intend to be a long-term player and felt at some point it makes sense to have someone on the ground, to get that much closer to new deal flow as well as secondary market trading opportunities."
In the near term, the group will not be doing a 100% European loan portfolio. Instead, it could mix European assets into existing U.S. funds or set up new funds split between U.S. and European loan assets. It will look at collateralized loan obligations and retail accounts or other types of funds. Keeping with current practices, Redding will be looking at new issue across industries to set up diversified portfolios. Similarly, in the states Eaton Vance is primarily a first-lien player, although it does have some small buckets for second liens or mezzanine funds, and that approach will continue in Europe.
Although he will go to many bank meetings in Europe, Redding anticipates working on one of every four to five European deals the firm participates in, with credit analysts in Boston handling the rest. He will also be the primary front person for sourcing new transactions as they come to market and setting up relationships. With the European market much more relationship-centered, Redding will spend a fair amount of time working with agent banks and financial sponsors. Thus far, he said he has received a warm welcome. "My sense is that this reflects not only the sizable commitments which we can make, but more importantly our well established operating philosophy of being a constructive partner through economic and lending cycles," Redding said.
Redding is currently sharing office space with a few retail brokers who are selling Eaton Vance retail funds in Europe. There are no firm plans regarding hiring more staff, or if and when that would happen. It is also unknown whether these potential employees would be from the firm's home office in Boston or locals. Many of these decisions will greatly depend upon deal flow and credit quality, Redding said.
Europe has become the destination spot for my investors, with a number of U.S. buysiders setting shops across the pond. Credit Suisse First Boston's Leveraged Investments Group (LIG), a part of CSFB's Alternative Capital Division, set up a shop to manage leveraged loans, mezzanine debt and high-yield bonds. Highland Capital Management finalized its acquisition of ING Capital Management's (ICM) European loan business from ING Wholesale Banking in April. Babson Capital Management acquired Duke Street Capital Debt Management. GoldenTree Asset Management opened a London office in June and The Carlyle Group completed its first European CLO in March. U.S. players are attracted to what they see as an untapped market with better growth opportunities and better pricing than what they see in the U.S.
