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"Every year, the prestigious Forum on Closed-End Funds & Global ETFsCarla Partnernak. recognizes outstanding closed-end funds," notes

The editor of High Yield Investing explains, "This year, Eaton Vance Risk-Managed Diversified Equity Income (NYSE: ETJ) won the Most Innovative New Product Award for coming up with the most novel strategy to generate high returns for shareholders."

"If you're fed up with the market's gut-wrenching swings, this fund -- our choice for 'High-Yield Security of the Month' --'is for you.

"Launched late last July amidst one of the most tumultuous markets in recent memory, Eaton Vance Risk-Managed is designed to keep returns stable and cushion downside risk during stock market declines.

"It also minimizes taxes by dishing out tax-advantaged dividends. The goals are ambitious, but the strategy is simple, and in its year-long history, the fund has already earned its stripes.

"You can find lots of funds that use options to goose returns, but not many of them are as successful as this one. The fund has generated total returns of nearly 8% so far this year, beating the S&P 500 index by over 10% and ranking in the top 20% of its category.

"Not only that, after-tax returns are also well ahead of the benchmark S&P 500, with about 92% of 2007 distributions qualifying for the reduced tax of up to 15%.

"Closed-end funds are known for their sizzling yields, but not all yields are created equally. Some funds bulk up their payouts by dipping into their equity, but this fund's tantalizing 9.5% yield is powered exclusively by earnings and investment gains.

"Launched on July 31, 2007, ETJ's $1.4 billion portfolio is managed by Eaton Vance, one of the three largest closed-end fund specialists in the world. It maintains a portfolio of about 100 dividend-paying stocks, diversified across the U.S. economy.

"Top holdings include General Electric, ExxonMobil, and Berkshire Hathaway. The fund engages in a variety of option strategies on its stock portfolio to protect its value in a volatile market.

"Since inception, the fund has paid three quarterly dividends of $0.45 a share. That annualizes to $1.80 per share and gives the fund a projected yield of 9.5% of today's share price ($1.80/$18.95).

"In 2007, the distribution came from investment income earned from the fund's dividend-paying stocks, short-term capital gains from options premiums, and long-term gains from selling profitable stocks held more than a year.

"About 34% of the dividend income qualified for the lower dividend tax rate of 15%, roughly 58% counted as long-term capital gains also taxable at the 15% rate, and the balance of about 8% was mostly short-term gains taxed as ordinary income.

"Since the fund booked only one distribution in 2007, this break-down may not reflect this year's distributions. As such, a tax-deferred account may provide the best protection from potential tax consequences. Eaton Vance offers a dividend reinvestment plan.

"The fund's option-writing strategy has helped generate healthy year-to-date (through May 31st) total returns (share price and dividends) of 7.7%. That compares to a 3.8% loss for the average stock in the S&P 500.

"The fund has benefited from the market's volatility, spurred in part by the subprime mortgage crisis. ETJ earns money from the premiums it receives from writing call options on its portfolio holdings.

"The strategy benefits from market volatility because that tends to raise investors' expectations that stocks will continue to be volatile. This expectation of volatility increases the price of options and the premiums received from writing options.

"The fund also enjoyed capital gains from the share price appreciation of some of its holdings, while it was able to protect its portfolio from downside risk with put options.

"In its short history, the fund has so far proven to be in the right place at the right time. Going forward, if the markets were to stabilize, ETJ's management would likely adapt their options strategy accordingly.

"The fund's diversified portfolio of iconic U.S. dividend-payers should support returns over the long haul, despite the market's ups and downs. Despite market volatility, the fund's net asset value has held up well, moving from $19.10 per share last July to a current $19.25.

"At the same time, investors' risk aversion in the face of this volatility is putting downward pressure on the share price. As a result, the fund is selling at slight discount of -1.6% to the value of its blue-chip portfolio holdings.

"For investors seeking to protect their portfolio from volatile markets and downside risk, this fund should prove a welcome addition. As a relatively new fund with a short track record, ETJ is suited for a somewhat more aggressive investor."