EOS EOI ETV ETB

I manage my elderly mother's money for her. The last few years she's
been mainly in equities and has done well. I'm looking at trying to
mitigate some of the risk and still get her some decent return..

I came across these closed ended funds from Eaton Vance - EOS EOI ETV
ETB They hold equities in these funds and either sell covered calls on
the equities they hold or sell call options on the S&P 500 and NASDQ 100
in order to generate income. Theoretically this should result in a more
stable price - less gain when the market goes up dramatically and less
loss when it goes down. However, they all pay a dividend of around 9%.
In addition, some are tax managed. I'm looking to try and capture the
dividend.

Any thoughts on these?

Willi

Re: EOS EOI ETV ETB

"Willi" <> wrote

> I'm looking to try and capture the dividend.
>
> Any thoughts on these?
>
> Willi

I suggest that you visit the Eaton Vance website and read the prospectus for
those funds. Even though they use leverage it can still be very difficult to
deliver 9% returns and these returns may include return of capital (ROC).
Many of these funds do this in an effort to provide fairly consistant
distributions. ROC is not taxable to you but it does reduce your cost basis
and careful bookkeeping is required. The yield is the result of the
distribution divided by the price and it's reported that way even though it
may include ROC.

Re: EOS EOI ETV ETB

I would be hard pressed to believe that these funds' approach to producing
income for its investors is lower risk than funds simply dedicated to high
dividend yield stocks.

Also, are you aware of the sales load and annual expenses on this closed end
fund? EOS, for one, appears to take 4.5% right off the bat. Then there's a
1.2% annual fee. But maybe this is usual for a closed end fund; and maybe
you're willing to gamble the income will make up for these.

For income, at the moment I personally am far more interested in exchange
traded funds PEY, PID, PFM, PHJ. See


Vanguard is supposed to have an ETF and mutual fund like the PEY, PFM, and
PHJ coming out in December as well.

Remember, for these ETFs, the dividend will grow over time. So PHJ, for one,
with a dividend growth rate of about 18% each year, should quadruple its 2%
yield within about eight years.

"Willi" <> wrote
> I manage my elderly mother's money for her. The last few years she's
> been mainly in equities and has done well. I'm looking at trying to
> mitigate some of the risk and still get her some decent return..
>
> I came across these closed ended funds from Eaton Vance - EOS EOI ETV
> ETB They hold equities in these funds and either sell covered calls on
> the equities they hold or sell call options on the S&P 500 and NASDQ 100
> in order to generate income. Theoretically this should result in a more
> stable price - less gain when the market goes up dramatically and less
> loss when it goes down. However, they all pay a dividend of around 9%.
> In addition, some are tax managed. I'm looking to try and capture the
> dividend.
>
> Any thoughts on these?

Re: EOS EOI ETV ETB

"Elle" <> wrote

> Also, are you aware of the sales load and annual expenses on this closed
> end
> fund?

Go back to sleep.

Re: EOS EOI ETV ETB

"Elle" <> wrote in message
news:3EN6f.482$
>
> Also, are you aware of the sales load and annual expenses on this closed
> end
> fund? EOS, for one, appears to take 4.5% right off the bat.

Cite your reference for this.

Re: EOS EOI ETV ETB

"Elle" <> wrote in message
news:3EN6f.482$

>
> Also, are you aware of the sales load and annual expenses on this closed
> end
> fund? EOS, for one, appears to take 4.5% right off the bat. Then there's a
> 1.2% annual fee. But maybe this is usual for a closed end fund; and maybe
> you're willing to gamble the income will make up for these.
>

Willi, I wouldn't accept the above information.
Rather, I would check below, for myself and see how WRONG it is.

Re: EOS EOI ETV ETB

Gary C wrote:
>
> "Elle" <> wrote in message
> news:3EN6f.482$
>
> >
> > Also, are you aware of the sales load and annual expenses on this
> > closed end fund? EOS, for one, appears to take 4.5% right off the
> > bat. Then there's a 1.2% annual fee. But maybe this is usual for a
> > closed end fund; and maybe you're willing to gamble the income will
> > make up for these.
> >
>
> Willi, I wouldn't accept the above information.
> Rather, I would check below, for myself and see how WRONG it is.
>
>

It represents a fundamental misunderstanding of traditional (as
contrasted with ETF) closed end funds.

Loads are charged when a fund itself sells shares. For a continuously
offered fund (usually an open end fund), all shares are sold by the fund
itself. For a traditional closed end fund, well, here's a quote from
the Closed-End Fund Ass'n:

"Closed-end funds, unlike open-end funds, are not coninuously offered.
There is a one-time public offering, and once issued, shares of
closed-end funds are sold in the open market through a stock exchange."


Then from Yahoo, we have:
"Since the initial offering price of a closed-end fund includes a sales
commission, the shares are inevitably issued at a premium over the asets
that will actually be invested."


Or to put it all together:
"History shows that initial public offering (IPO) is often the worst
time to purchase a closed-end fund. When new funds come to market, the
initial offering price includes the fees, commissions, and expenses
necessary to market the fund. For example, a fund's IPO price may be $20
with an underwriting fee of 5 percent. Only $19 is available to the fund
to purchase assets."


If one is really interested, here's a paper entitled "The Marketing of
Closed-End Fund IPOs: Evidence from Transactions Data". While it is a
decade old, not much has changed. To answer Elle's question about
whether this is usual for a closed-end fund: yes, the paper says that
"selling fees [of] around 4.5% of the proceeds ... are typical".


FWIW, the prospectus does indeed say that the IPO load *was* 4.5%.


The expense ratio given is also in error. 1.2% comes from the year-old
prospectus (which states it as an estimate). The current figure is
1.03%-1.07%, as shown in the semi-annual statement, p.12 (pdf p. 13).
(The range depends on whether one wants the expense ratio based on
"current" assets (June 30th), or "average" assets over the period of the
statement.)


--
Mark Freeland

Re: EOS EOI ETV ETB

"Willi" <> wrote in message
news:

>I manage my elderly mother's money for her. The last few years she's been
>mainly in equities and has done well. I'm looking at trying to mitigate
>some of the risk and still get her some decent return..
>
> I came across these closed ended funds from Eaton Vance - EOS EOI ETV ETB
> They hold equities in these funds and either sell covered calls on the
> equities they hold or sell call options on the S&P 500 and NASDQ 100 in
> order to generate income. Theoretically this should result in a more
> stable price - less gain when the market goes up dramatically and less
> loss when it goes down. However, they all pay a dividend of around 9%. In
> addition, some are tax managed. I'm looking to try and capture the
> dividend.

People selling stuff like this should be required by law to state what the
yield would be without the "return of capital" (ROC) feature. Don't be
misled by the attractive 9% figure without futhrer investigation and knowing
how much of that is your own money coming back to you. If you want to spend
capital, you could just take a fixed amount out of the bank every month and
not have to pay anyone a sales charge or management fee or anything else. I
have $1000 in the bank, and next year I am going to spend $500 of it. Oh,
boy, I am getting a dividend of 50%!

Re: EOS EOI ETV ETB

Ed wrote:
> "Willi" <> wrote
>
>
>>I'm looking to try and capture the dividend.
>>
>>Any thoughts on these?
>>
>>Willi
>
>
> I suggest that you visit the Eaton Vance website and read the prospectus for
> those funds. Even though they use leverage it can still be very difficult to
> deliver 9% returns and these returns may include return of capital (ROC).
> Many of these funds do this in an effort to provide fairly consistant
> distributions. ROC is not taxable to you but it does reduce your cost basis
> and careful bookkeeping is required. The yield is the result of the
> distribution divided by the price and it's reported that way even though it
> may include ROC.
>
>
>

What got me interested is this concept was reading about the BXN index.
BXN is the index that covers S&P 500 BuyWrite Index (own the S&P and
write covered calls on each stock)



The return since 1989 is SLIGHTLY more than just holding the S&P but the
volatility is MUCH less. (Which is what I'm looking for) The income
from selling the covered calls helps to flatten the volatility. BXN was
only down two years and compared to S&P's 4.

MCN is another one I looked at:



Much less volatile than the indexes over the year it's been around, but
beats them all slightly when you add in the dividend.

(The expenses of the funds I looked at were around 1% - no 4.5% upfront
charge. EOS is trading at about a 4% premium to its NAV which might be
what Elle was referring to)


Maybe a ETF or close ended fund that follows BXM and/or BXN (the NASDQ
Buy/Write Index) would be ideal but I can't find any.

Willi

Re: EOS EOI ETV ETB

"Willi" <> wrote
> (The expenses of the funds I looked at were around 1% - no 4.5% upfront
> charge. EOS is trading at about a 4% premium to its NAV which might be
> what Elle was referring to)

The prospecti for EOS and EOI (I didn't check others) both claim a 4.5%
"sales load paid by you (as a percentage of offering price).

The prospecti do discuss providing income as necessary via return of
capital.

Re: EOS EOI ETV ETB

"Willi" <> wrote

> (The expenses of the funds I looked at were around 1% - no 4.5% upfront
> charge. EOS is trading at about a 4% premium to its NAV which might be
> what Elle was referring to)

Elle doesn't understand, she did mean the front end load and was wrong.

> Maybe a ETF or close ended fund that follows BXM and/or BXN (the NASDQ
> Buy/Write Index) would be ideal but I can't find any.
>
> Willi

None that I know of.

Re: EOS EOI ETV ETB

Willi wrote:
>

> Maybe a ETF or close ended fund that follows BXM and/or BXN (the NASDQ
> Buy/Write Index) would be ideal but I can't find any.
>

BEP, or if you like it leveraged, BEO. (I haven't yet found expenses,
so it is quite possible that while you'll reduce volatility, you may do
it with reduced total returns if the expenses are at all significant.)

Note that the Thompson Financial report on BEP says that so far, this
fund has correlated poorly with the S&P 500 - 10%-20%, falling when the
market is up, and flat on market down days.
--
Mark Freeland

Re: EOS EOI ETV ETB

"Elle" <> wrote

> The prospecti for EOS and EOI (I didn't check others) both claim a 4.5%
> "sales load paid by you (as a percentage of offering price).

If you buy the IPO, not if you buy it on an exchange from a seller.
Go back to sleep.

Re: EOS EOI ETV ETB

"Don" <> wrote

> People selling stuff like this should be required by law to state what the
> yield would be without the "return of capital" (ROC) feature. Don't be
> misled by the attractive 9% figure without futhrer investigation and
> knowing how much of that is your own money coming back to you. If you want
> to spend capital, you could just take a fixed amount out of the bank every
> month and not have to pay anyone a sales charge or management fee or
> anything else. I have $1000 in the bank, and next year I am going to spend
> $500 of it. Oh, boy, I am getting a dividend of 50%!

I agree. I have mixed feelings about ROC. Personally, I have no interest in
it but I can see where some investors might like to get a stream of payments
that they can kind of count on.
Usually when I invest in something it isn't so that they can send my
investment back to me.

Re: EOS EOI ETV ETB

Go here and look around, you may find something of interest.

Re: EOS EOI ETV ETB

I wrote:
>
> BEP, or if you like it leveraged, BEO. (I haven't yet found expenses,
> so it is quite possible that while you'll reduce volatility, you may do
> it with reduced total returns if the expenses are at all significant.)

Here are the SEC filings:
BEP (S&P Covered Call Fund)

(all filings)

(semi-annual report, June 30th)

(prospectus)

With a 1% expense ratio, it looks reasonably likely that this will
underperform S&P 500 index funds, though still with reduced volatility.

BEO (Enhanced S&P 500 Covered Call Fund)

(all filings)

(prospectus)

I doubt this is what you have in mind, since leveraging only increases
risk, volatility, and costs (not what you said you were looking for).


--
Mark Freeland

Re: EOS EOI ETV ETB

"Ed" <> wrote in message
news:

> I agree. I have mixed feelings about ROC. Personally, I have no interest
> in it but I can see where some investors might like to get a stream of
> payments that they can kind of count on.
> Usually when I invest in something it isn't so that they can send my
> investment back to me.

Yes, a fixed income stream is appealing, but it doesn't take great effort to
set it up yourself. For example, invest most of the capital in good dividend
paying stocks and/or mutual funds, bonds, etc., and then dip into a little
of the remaining capital each month. As a wild guess, I would bet that,
considering sales charges and management fees, this plan would yield more
income in the long run than the ROC products and more of the capital would
be left over (which a retired person's heirs would view as a happy
situation).