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Eaton Vance Enhanced Equity Income Fund II
Eaton Vance launched its second Enhanced Equity Income closed-end fund in January 2005, following the original fund from the prior year. The listed vehicle...
Eaton Vance Enhanced Equity Income Fund II
Eaton Vance launched its second Enhanced Equity Income closed-end fund in January 2005, following the original fund from the prior year. The listed vehicle invests in large-cap US equities that track the S&P 500 and writes call options on the S&P 500 Index and, to a lesser extent, the NASDAQ 100 Index. Eaton Vance Management serves as investment adviser and executes the option overlay that supports monthly distributions. The firm, acquired by Morgan Stanley in 2021, has used the structure to develop additional option-income closed-end funds with varying overwrite levels.
General information
Firm type
Asset Manager
Year founded
2005
Location
Region
North America
Country
United States
City
Boston
Corporate office
Boston, MA, United States
Sector focus
Frequently asked questions
How does the fund generate income above typical equity dividends?
The fund buys a portfolio of large-cap US stocks and systematically sells index call options — mainly against the S&P 500 and NASDAQ 100. The premium income from option sales is distributed to shareholders as monthly income. The trade-off is capped upside in rising markets; if the index rallies past the strike price, the fund doesn't participate in gains above that level.
Who manages the fund's option overlay strategy?
The fund is managed by Eaton Vance Management, part of Morgan Stanley Investment Management since the 2021 acquisition. The option-writing decisions are executed by Eaton Vance's equity team, which adjusts the percentage of portfolio overwritten and the strike levels based on market volatility and the fund's distribution targets.
Is the fund's distribution a guaranteed return of capital?
Distributions are a mix of option premium income, dividends on the underlying equity holdings, and potentially return of capital or capital gains depending on the period. In market environments where option premiums are thin relative to the distribution rate, a portion of the payout may constitute a return of capital — which reduces the fund's net asset value per share. The precise tax character is reported annually.
How does leverage work within this closed-end fund?
The fund has the ability to use leverage, typically through preferred shares or borrowings, to amplify the income generated on the underlying equity and option portfolio. The leverage increases both potential distribution coverage and risk exposure. Historical leverage levels have been moderate compared to more aggressive leveraged CEFs.
What happens to the fund during a sustained equity rally?
In a strong bull market, the fund's total return typically lags the S&P 500 because the call options sold against the index cap upside participation. The fund delivers current income rather than maximum total return. This makes it structurally suited for investors prioritizing cash flow over capital appreciation, and less suitable for those seeking full market exposure.
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