EXG: 7.9% international equity return (NYSE: EXG)

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The Tax Managed Diversified Global Equity (EXG) Income Fund is a buy-write fund of the Eaton Vance family. The fund’s primary objective is current income and gains and, as the name suggests, focuses on a portfolio of international equities. The fund presents good analyzes with a 5-year Sharpe ratio of 0.84, a standard deviation of 14.6 and a maximum Covid-induced draft of -26% which was recovered in 10 months. EXG is a robust vehicle and its rolling total returns show strengthening, with the 5 and 10 year trailing total returns being 15.5% and 12.9% respectively. Under normal market conditions, the Fund invests at least 40% of its total assets in securities of non-US issuers, including issuers located in emerging countries. The fund is not a typical buy-write vehicle as it currently only sells options on 49% of the underlying stock portfolio, meaning it manages half of the portfolio only in long stocks. The Fund writes call options on the S&P 500 Index and at least one general foreign stock index, and may also write call options on other domestic and foreign stock indexes. Therefore, there is a basis between the performance of the index and the underlying stocks held by the fund. If the fund chooses to outperform the index, the basis is positive, that is, it is added to the total returns of the fund. The fund intends to generally limit the overlap between its equity holdings and each index on which it has outstanding option positions to less than 70% on an ongoing basis. We love this fund and it has only had one year of negative total returns over the past decade, making it a good income base addition to a well-balanced portfolio. A retail investor looking to diversify their portfolio away from purely North American exposure would be well served by EXG, especially on the backs of large investment banks such as JP Morgan who expect international equities to outperform North American equities. We are Bullish here on EXG. A savvy investor would be better served by starting now to add small positions and layer them on top of the name.

CEF metrics

This section details certain CEF measures and the overall analysis of the fund:

Leverage ratio: 0%

  • Buy-write CEF, without leverage used.

Expense ratio: 1.07%

  • Average in the purchase-write space

Manager: Eaton Vance

Yield: 7.9%

  • Average of the asset class.

Discount / Z-Stat: 1.26% / 0.88

  • The fund trades at a premium.
  • The premium is average taking into account the statistical data on this fund.

Options strategy

  • The fund is currently selling options on 49% of its underlying portfolio
  • The average duration of the options is 15 days
  • The fund writes call options slightly out of the money (3.7% OTM)

AUM: $ 3.02 billion

  • The fund has a high amount of assets under management for the asset class


Part of the Eaton Vance product line, the fund has an international focus, with large European and Asian segments:

EXG geographic mix

Geographic mix
Source: Eaton Vance

Top 10 holdings contain some of the familiar FAANG headlines, but also a number of international indicators:

The 10 main titles of the EXG

Top 10 holdings
Source: Eaton Vance

Nestlé, ASML Holding, and adidas AG are international names that are typically not found in US-focused buy-sell funds. However, the fund is overweight technology as a sector, similar to what we’ve seen in other buy-write products from Eaton Vance:

GICS sectors

GICS sectors
Source: Eaton Vance


Over the past 3 years, EXG has managed to outperform other sister funds in the Eaton Vance suite, namely the Eaton Vance Tax Managed Buy-Write (ETV) Opportunity Fund and Purchase Vehicle – Eaton Vance’s tax-managed global entry (ETW), primarily due to its percentage long position in core stocks:

EXG, ETW, EOI and ETV: total returns

Total returns
Source: In Search of the Alpha

EXG performed well in the last Fed tightening cycle, with a total return of 32% over the 2013-2015 period, but it lags behind its peers:

EXG, ETW, ETV and EOI: total returns

Total returns
Source: In Search of the Alpha

The fund only lost money in 2018, due to the violent market liquidation at the end of the year:

EXG Total annual return

Annual total ret
Source: author

EXG also has a stable performance, with a minimum number of months with negative total returns:

EXG months with negative returns

Months with negative returns
Source: author

The fund has a nice boxed trendline, with $ 8 / share providing support and $ 10 / share providing resistance:

historical px EXG

historical px
Source: In Search of the Alpha

Since this is a buy-sell fund, it is not necessarily a true technical analysis, but rather a choice of manager and performance. However, given the stability of the NAV, dividend yield and historical performance, we can see over the last 5 years that the fund has shown a well-framed price performance. What does it mean? This means that when the price drops below $ 10 and goes down, it triggers a strong buy signal.

Market price versus net asset value

The fund has had an extremely stable net asset value over the past decade:

EXG Market Px vs NAV

Px vs NAV market
Source: CEF Connect

What does it mean? This means that the fund manager pays dividends from the illustrated strategy they are implementing rather than withdrawing the principal / net asset value of the fund to pay it as a return. This says a lot about the portfolio management team and denotes a buy and hold vehicle. The significant erosion of net asset value over time makes a CEF a more cyclical instrument with management teams focused on optics and marketing rather than the underlying financial strategy.

We can also see that for long periods of time the fund trades at a market price below the NAV:

EXG discount to net asset value

Reset to net asset value
Source: Morningstar

In the chart above, the green areas are periods when the fund had a market price below the NAV. Blues are when the fund is priced higher than the net asset value. We can see an ocean of green between 2011 and 2017, with a similar performance in 2019 and 2020.


Since the fund manages a significant part of its portfolio in long equities, a significant part of the distribution is made up of long-term capital gains:

Composition of EXG distributions

Composition of distributions
Eaton Vance
Source: Fonds Section 19 (a)

Income from the option buy-sell strategy is included in the “Return of capital” section. The main difference here for tax-advantaged investors compared to other buy-sell funds is that you will get more long-term capital gains from EXG compared to other funds. A typical buy-sell that covers more than 90% of its portfolio with options will primarily earn ROC (i.e. return of capital). So, depending on your tax goal, EXG might not be the most suitable product.


EXG is an Eaton Vance closed-end fund that falls into the buy-write category, although it currently only writes covered call options on half of its portfolio. The fund has had a very strong performance over the last 5 and 10 years and only lost money for one year in the last decade, namely 2018. We love the fund’s analysis and returns of EXG. We are Bullish here, with a layered approach in mind and little additions on the weakness.

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