Global Buy-Write Fund Gets Boost from Top Managers

06/10/2020 5:00 am EST

Focus: FUNDS

Michael Foster

Editor, BNK Invest

You can’t tell by the fund’s name, but the core portfolio at the Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund (ETW) revolves around tech, notes Michael Foster, closed-end fund expert and investment strategist at CEF Insider.

However, the beauty of this fund is that it has no mandate to be rooted in technology: ETW gives its managers a lot of leeway, letting them buy opportunistically in whatever sector they spot value.

It’s just that right now, the pair of experts who run ETW are smartly sticking with tech — which, as I’m sure you’ve noticed, the world has suddenly become extremely dependent on. Management has also sprinkled in some non-tech stocks with bright prospects, too.

Eaton Vance is one of the oldest US investment firms, dating back to 1924, and boasts $500 billion in assets under management. Its large size and long history give it a wealth of research tools and connections across industries.

The firm is also one of the biggest and most aggressive proponents of the CEF approach to investing, and they use the CEF structure to investors’ advantage better than many other shops do.

The company also attracts top talent—and when managers land at Eaton Vance, they tend to stick around. Consider ETW’s two managers, who are exactly the kind of people we want in a market like this: experienced and cautious.

Heading the fund is Michael Allison, a CFA charterholder who has been with Eaton Vance since 2000 and has been in finance since 1988. Michael is supported by Thomas Seto, who has managed ETW since its inception in 2005 and specializes in optimizing the tax advantage of a rotated CEF portfolio.

The “Tax-Managed” in the fund’s name refers to the portfolio’s attempt to minimize short-term capital gains and maximize return of capital; Seto has made a name for himself delivering these tax-advantaged returns.

It’s the income that really sets ETW apart. With a 10.8% yield, we’re getting a very generous income stream from this fund, which is also a monthly payer.

And don’t forget the “buy-write” part of ETW’s name. This is a covered-call-focused fund. ETW lives up to its name, since it writes call options on over 90% of its portfolio.

This adds another layer of safety (since the value of those written call options goes up when the stocks themselves go down) and another layer of income (since these options produce cash from the premium paid into ETW).

None of this means ETW is a “set-it-and-forget-it” fund. Its risk-averse approach means it will underperform over the long haul. But for now, ETW is a great buy for a 10.8% dividend and upside. Action to Take: Buy the Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund to $9.00.

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