Wall Street opened its doors to the biggest initial public offering of a closed-end fund in history Tuesday.

Eaton Vance ( EV) launched the Eaton Vance Tax-Managed Diversified Equity Income Fund ( ETY) this morning, issuing 131 million shares at a price of $20 each.

The resulting gross proceeds of $2.62 billion made it the largest ever closed-end fund IPO.

The fund is now trading on the New York Stock Exchange under the ticker symbol ETY. The underwriting syndicate was led by Wachovia Securities, Citigroup, UBS and A.G. Edwards.

Eaton Vance says the new fund will seek to earn high levels of tax-advantaged income and gain by investing in a portfolio that emphasizes stocks paying qualified dividend income, and by selling stock index call options with respect to a portion of its portfolio value.

"The size and success of the launch speaks to investors' huge interest in income sources," says Duncan Richardson, chief investment officer at Eaton Vance. "It gets income from two different ways -- dividends from the stocks in the portfolio, as well as premiums from the sale of index options."

Under normal market conditions, the fund will invest at least 80% of its total assets in a combination of dividend-paying common stocks and stocks whose value may be subject to covered written index call options. The fund will invest primarily in common stocks of U.S. issuers, but it can invest up to 40% of its assets in shares of foreign companies.

As to the issue of closed-end fund IPOs curiously dropping in price soon after their debut, Richardson advises that investors look at the ETY as a "long-term investment vehicle" because stocks can be deceptively volatile in the short term.

Click here to listen to an interview with Richardson.

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