The correct answer is      (D.)  Eaton Vance (EV)

When most investors think of enormous long-term returns, the first companies that come to mind are often widely-publicized success stories like Microsoft, Intel, and Home Depot. Although these stocks dominate the news headlines, some of the biggest gains of the past 20 years have come from little-known companies like Eaton Vance -- smaller firms with superior business models, strong profit margins, and high barriers to entry.

Boston-based Eaton Vance is one of the nation's oldest asset management shops. The company manages over 150 mutual funds, as well as a variety of closed-end funds and institutional accounts. As of April 2007, the firm boasted nearly $145 billion in assets under management.

Eaton Vance is perhaps best known for its closed-end fund offerings. In each of the past four years, no other firm has issued more closed-end funds than EV. 

Asset Management Stocks Deliver Tremendous Profits
Today, mutual funds, exchange-traded funds (ETFs) and closed-end funds (CEFs) are undoubtedly some of the most popular investment vehicles on the planet. 

According to the latest figures from the Investment Company Institute, investors have more than 8,000 mutual funds to choose from in the U.S. alone. And in recent months, the combined assets of those funds have risen by $200-$300 billion per month -- lifting total domestic industry assets above the $10 trillion mark.

Throughout 2006, stock funds raked in more than $1 trillion in total inflows -- +22% ahead of the previous year's pace. Meanwhile, taxable bond funds, hybrid funds, and muni bond funds brought in $264 billion, $86 billion, and $60 billion, respectively.

On the heels of those gains, worldwide mutual fund assets are now fast approaching $20 trillion. As the chart below shows, that total is roughly +50% above the totals from just three years ago.

By any standard, these numbers are mind-boggling. In the span of a few decades, we've gone from a few hundred funds holding $50 billion in assets to 59,400 funds with $20 trillion in assets.

In all likelihood, you may own several funds yourself. However, have you ever stopped to consider the investment potential of the companies that manage those assets? After all, virtually all funds extract management fees for their services.

Betting on the House
As you can see, the mutual fund industry has delivered explosive growth in recent years. It should come as no surprise then that over the past three years, the average money management stock has delivered outsized gains of +33% per year.

Eaton Vance (EV) is just one of those firms . . . but many other companies are also profiting handsomely from booming growth in the asset management business.

In a recent issue of his premium value investing newsletter -- Half-Priced Stocks -- editor Nathan Slaughter took an in-depth look at this industry. In the process, he identified five firms that should deliver strong gains in the coming years.  These include . . . 

• One of the nation's largest money managers, this firm manages more than $220 billion in assets. The company is also a leader in the institutional arena, boasting an established base of 5,400 high-end clients -- including corporate pensions, university endowments, and government agencies.
• With $53 billion in international fund sales last year alone, this asset manager is poised to capitalize on booming growth in overseas markets.
• With steady revenue gains, low capital requirements and healthy operating margins, this firm's return on invested capital (ROIC) regularly exceeds 40%!

If you'd like to learn the names of these companies, plus receive a steady stream of value investing advice each and every month, you'll need to subscribe to Nathan Slaughter's Half-Priced Stocks newsletter. Visit this link to sign up now.