Navigating Eaton Vance Closed-End Funds: A Warning on Return of Capital and NAV Erosion

The May 2025 distribution reports from Eaton Vance Closed-End Funds reveal a critical crossroads for investors. While many funds continue to deliver steady income, the reliance on return of capital (ROC) and declining net asset values (NAVs) raise red flags about sustainability. This analysis dissects the data to identify which funds are at risk of eroding investor principal—and why now is the moment to act.
The ROC Problem: A Silent Erosion of Capital

Return of capital—when distributions exceed a fund's income or realized gains—does not reflect investment performance. Instead, it represents a return of the investor's own capital, shrinking the fund's NAV over time. Eaton Vance's May data shows alarming reliance on ROC:
- ETJ (Risk-Managed Diversified Equity Income): 100% of its May distribution was ROC.
- ETB (Tax-Managed Buy-Write Income): 95.6% ROC in May, contributing to 95.8% ROC in YTD distributions.
- ETW (Global Buy-Write Opportunities): 83.9% ROC in May, with 88.3% ROC YTD.
These funds are effectively paying investors from their own money, a trend that cannot persist without eventual collapse. The would starkly illustrate this mismatch between distributions and underlying value.
NAV Declines: A Mirror of Fund Health
The performance metrics underscore a broader issue: most Eaton Vance funds are underperforming year-to-date (YTD). Negative cumulative NAV returns—such as EOI's -3.25% and EOS's -6.35%—mean distributions are outpacing the fund's ability to generate returns.
- EXG (Tax-Managed Global Diversified Equity Income): Despite a 9.02% annualized distribution rate, its NAV fell by -0.41% YTD.
- ETG (Tax-Advantaged Global Dividend Income): While its NAV rose 0.38% YTD, 31.1% of its May distribution was ROC.
The would reveal a widening gap between distributions and NAV growth, signaling systemic strain.
The Funds to Avoid—and the Ones to Prioritize
Not all Eaton Vance funds are equally risky. Investors must distinguish between sustainable income generators and ROC-dependent traps:
Avoid: High ROC, Negative NAV Funds
- ETJ: 100% ROC in May, with a 5-year NAV return of just 9.12%.
- ETB: 95.6% ROC in May, and a -4.80% YTD NAV drop.
- ETW: 83.9% ROC in May, with -4.80% YTD returns.
These funds are cannibalizing capital to meet distribution promises. A would show how ROC has surged as NAV stagnated.
Prioritize: Funds with Capital Gains-Backed Distributions
- EOI (Enhanced Equity Income): 100% of May distributions came from long-term capital gains. Its 14.12% 5-year NAV return provides a buffer.
- EVT (Tax-Advantaged Dividend Income): 84% of May distributions from capital gains, with a 12.45% 5-year NAV return.
These funds align distributions with performance, avoiding principal erosion.
Action for Investors: Prune Portfolios Now
The data is unequivocal: Eaton Vance's closed-end funds face a reckoning. Funds relying on ROC to meet distribution targets risk long-term NAV destruction. Here's what to do:
- Liquidate High-ROC Positions: Sell stakes in ETJ, ETB, and ETW before ROC depletes NAV further.
- Reallocate to Sustainable Funds: Shift capital to EOI and EVT, which derive distributions from capital gains.
- Monitor NAV Trends Closely: A can alert investors to further declines.
Conclusion: The Clock Is Ticking
Eaton Vance's May distributions highlight a stark truth: not all income is created equal. Funds using ROC to prop up payouts are setting investors up for losses. With YTD NAV declines and unsustainable distribution structures, the window to exit high-risk positions is narrowing. Investors who ignore these signals risk watching their capital evaporate. The time to act is now—before erosion becomes irreversible.
Data as of May 26, 2025. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.
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