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Douglas Albo  

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  • Equity CEFs: Searching For The Right Balance Of Income And Appreciation Funds, Part II [View article]
    That's a good question. There's no K-1's which is a big advantage. You'll see your distributions on your year end 1099's identified in the 1099-DIV box as either ordinary dividends, which are reportable, or non-dividend distributions, which are not.
    Dec 8, 2012. 01:25 PM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I don't consider 1% onerous. Equity mutual funds are about the same and they don't have near the yields of most equity CEFs. Then compare that to leveraged CEFs which can push the expense ratio over 2% because of borrowing costs.
    Dec 4, 2012. 08:57 AM | 2 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Yes, I have longer term total return NAV performances I keep on most of these funds. I compare from the market top around the end of the 3rd qtr 2007 and from the market bottom at around the end of the 1st qtr. 2009. This essentially gives me a 3 year and 5 year though I believe the high/low periods are more revealing since the first covers the recovery period and the second includes the bear market period as well. This gives you a pretty good idea of how the funds perform over different market conditions.

    If you are just interested in total return market price performances, go to http://ycharts.com, hit Chart Creator, put in "total return" and put in your time period you want. This will give you total return market performance though it assumes reinvestment of all distributions. Personally, I'm more interested in NAV total return performances since the market prices are often prone to investor emotions and are often wrong. But that's where the opportunities are.
    Dec 4, 2012. 08:54 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Yes, a good explanation of how these funds work. In essence, you cash in potential gains in the portfolio with the distributions. This works well in a flat market because the fund sells options and options are time depreciating assets. So time works in your favor with these funds in a flat market. Then consider the discount the funds are at, which give you a windfall yield over and above what the fund actually pays, and the tax-advantaged income with the ROC, and option-income funds are by far the funds you want to own in a flat or a trendless up and down market.

    Of course, in a strong up market, you may give up potential gains in option-income funds. And that is why I recommended at the beginning of the year for investors to include and even overweight leveraged funds to take advantage of an up market. It's all a balance with these funds to try and maximize income and appreciation.
    Dec 3, 2012. 08:48 AM | 1 Like Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Undistributed Net Investment Income is a non-issue in option-income funds. Unlike leveraged funds and dividend harvest funds, option-income funds don't rely on dividend or interest income to cover their distributions.

    UNII is almost always negative in option income funds because UNII doesn't include option premium, only dividends and interest. In fact, net investment income (NII) doesn't contribute much to total return in these funds either, maybe 1% - 2% annually. Not that hard to figure out...assume 2% - 3% portfolio yield minus 1% annual expenses.
    Dec 1, 2012. 05:14 PM | 2 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    "Tax-Managed" essentially means these option-income funds will try and limit capital gains by not allowing stock positions to get called away in a strong up market. They will close out their option-positions at a loss before they let stock get called away. This is why a lot of each distribution is able to be classified as ROC.

    "Risk Managed" essentially means the fund will also buy put options in addition to their covered-call option positions. IRR, an ING fund, is another "risk managed" fund. The problem with the "risk managed" funds is that they have very little NAV upside in a strong market.

    Though most of these funds are managed for tax advantaged income, I believe they are just as appropriate for retirement accounts. I don't know of any funds that are managed for non-taxable accounts.
    Dec 1, 2012. 05:05 PM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    You need to add back distributions to get a total return performance. Fund will look better once you do that but admittingly, EXG did not have a good first few years after it went public.
    Nov 30, 2012. 03:06 PM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    The Alpine funds, AOD & AGD, use a dividend harvest strategy to generate income which is completely different than the option-income strategy. AGD and AOD have been disasters and I have never liked them. I even compared AOD & AGD to the Eaton Vance option-income fund's EXG & ETY on several occasions starting with this article back in January of 2011...

    http://seekingalpha.co...
    Nov 30, 2012. 03:00 PM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I'm generally not as interested in total return market price performances as I am in total return NAV performances. But investors want to know market price performances and so that's what I include in my articles. In Y-charts, you can only show total return market prices and not NAV prices anyway. So to a degree, yes...I'm showing off a fund's total return market price over time frames that benefit the fund's income strategy, whether that be shorter term or longer term.

    However, I am not losing sight of what's really important and that is the fund's total return NAV performance. For total return NAV performances, I use the following time frames to compare funds. 1). from the market high at end of the 3rd qtr 2007; 2). from the market low at the end of the 1st qtr 2009 and 3). Year-to-date. This gives me a very good idea of how each fund performs over different market environments, generally equating to a 1-year, 3-year and 5-year time frame.

    So when I recommend funds, I may be putting out market price comparisons for public consumption but behind the scenes, I'm keeping a closer watch on their NAV performances.
    Nov 30, 2012. 10:55 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Wouldn't own it. One of the advantages of CEFs over ETFs is the discount feature which allows you to receive a windfall yield over and above the fund's NAV yield. Second, ETFs and mutual funds are subject to redemptions whereas CEFs are not. If investors sold PBP in a weak market not knowing it will hold up better than the broader market, the fund still has to meet those redemption demands. That may affect fund performance, though I haven't done any analysis to know if that has been the case.
    Nov 30, 2012. 10:05 AM | 2 Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I like the Nuveen option-income funds too. JLA is my favorite, but JSN and JPZ are fine too. Even more defensive than the Eaton Vance option-income funds. JPG I also like and own.

    Remember, all of the Nuveen option-income funds used to pay monthly so I think the advantage goes to the Eaton Vance option-income funds now, particularly since they have higher yields, wider discounts and better NAV performance this year. Last year, JLA, JSN & JPZ outperformed in a more flat market, but I think you can own both fund families...which I do.
    Nov 30, 2012. 09:59 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Thanks for your comment! You wouldn't by chance be....oh, never mind!
    Nov 30, 2012. 09:16 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Somewhat depends on the market. For a strong up market, EXG, ETY, EOI & EOS have the most upside because they don't sell as high an option coverage, around 50%. EOS I'm a bit disappointed with since it should be showing better NAV performance with the Russell 1000 doing so well (its primary benchmark). On the other hand, EOI is much improved and its now one of my bigger positions.

    For a more defensive market, ETV, ETB and ETW have about 95% option coverage so their NAV's will hold up better in a down market, though obviously, a bear market will not be good for any of these funds. ETJ is the only fund designed for a bear market though it has not really shown that it can maintain its NAV in ANY market environment so that's why its my least favorite of the EV funds.
    Nov 30, 2012. 09:12 AM | 1 Like Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    I have to put in that an investor would need to lower their cost basis by the ROC amount because that is what the IRS requires in a taxable account. Obviously, if you never sell the fund, this is not an issue but if you dividend harvest these funds by buying before the ex-div date and selling afterwards, you are required to lower your cost basis by the ROC amount for determining gain/losses on your returns.

    And yes, these funds have loss carryovers they can continue to use as well. I was using an example of how option-income funds can be managed to realize losses w/out assuming any carryover losses.

    And yes, I agree that the tax-advantages of option-income funds are not being fully appreciated by investors or the markets. Thanks for your comment!
    Nov 30, 2012. 09:00 AM | Likes Like |Link to Comment
  • Equity CEFs: Eaton Vance Really Wants You To Own Its Option-Income Funds [View article]
    Thanks for your comment. Yes, the Clough leveraged CEFs trade at very wide discounts but there's a reason for that. They all short securities as part of their leverage and I just don't like funds that short securities because it complicates managing the fund. So instead of using straight fixed-income borrowings for leverage, they also short securities. This means they have to be right on their long positions as well as their short positions, which is tough for any manager. This also means their expense ratios go through the roof (3%+ according to CEFConnect) because they are also responsible for any dividend paying positions they are short.
    Nov 30, 2012. 08:43 AM | Likes Like |Link to Comment
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