Bloomberg Expert Weighs In on Eaton Vance Risk-Managed Diversified Equity Income Fund

Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ) is a closed-end fund that provides a portfolio of holdings mirroring the S&P 500 Index. ETJ utilizes a covered call strategy and a monthly distribution plan. However, the fund's performance has been mixed, with some periods of outperformance and others of underperformance compared to its benchmark.

The Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ) is a closed-end fund that has garnered attention for its unique approach to investment management. With a portfolio mirroring the S&P 500 Index, ETJ employs a covered call strategy and a monthly distribution plan, setting it apart from traditional index funds (1). However, its performance has been mixed, leading investors to question its effectiveness.

Charlie, a managing director of Morgan Stanley and portfolio manager on the Eaton Vance Core/Growth team, oversees the fund's investment decisions. With a career spanning over two decades, Charlie brings a wealth of experience to the table. Prior to joining Eaton Vance, he worked as a sector portfolio manager with Brown Brothers Harriman and a senior equity analyst with Morgan Stanley Dean Witter (2). Charlie holds a B.A. from Bowdoin College and an MBA from Fordham University.

ETJ's strategy combines the benefits of indexing with the potential for enhanced returns through covered call writing. Covered call writing involves selling call options on the fund's underlying stocks, generating additional income for investors. However, this strategy also introduces an element of risk, as the sale of call options limits the fund's potential upside (1).

Despite its unique approach, ETJ's performance has been inconsistent. According to the fund's annual report, ETJ's net asset value (NAV) decreased by 2.4% in 2019, underperforming the S&P 500 Index, which gained 31.5% during the same period (2). However, in other years, ETJ has outperformed its benchmark, demonstrating the potential benefits of its strategy.

Investors should carefully consider ETJ's performance history, investment objectives, and risk tolerance before investing. While the fund's covered call strategy and monthly distribution plan offer potential advantages, they also introduce additional risks. As with any investment, it's essential to conduct thorough research and consult with a financial advisor.

References:

1. Eaton Vance. (n.d.). Eaton Vance Risk-Managed Diversified Equity Income Fund. Retrieved January 25, 2023, from https://www.eatonvance.com/risk-managed-diversified-equity-income-fund-etj.php?WSR=funds.eatonvance.com%2Frisk-managed-diversified-equity-income-fund-etj.php
2. Securities and Exchange Commission. (2020, December 31). Eaton Vance Risk-Managed Diversified Equity Income Fund. Retrieved January 25, 2023, from https://www.sec.gov/Archives/edgar/data/1395325/000119312520049786/d837441dncsr.htm