Biotech Values

[DewDiligence]

Re: Biotech mutual funds

I have bought and sold the HQH and HQL closed-end funds in IRA accounts a few times during the past decade –buying when the funds sold at a hefty discount to net asset value (NAV), as they often did when biotechs were out of fashion.

A unique feature of these funds is that they typically hold 20-25% of assets in private biotech firms.

Currently, these funds are not a bargain in terms of NAV: HQH sells at very close to its NAV and HQL sells at a 2% premium to NAV. (The two funds are essentially identical, so you can buy whichever one is cheaper relative to NAV.)

Although I do not currently own these funds myself, the foundation I work with holds HQH as one of its largest positions. (They do not trade in and out but just hold and occasionally add.)

Tax note: these funds distribute about 2% of NAV each quarter, so they are better suited a tax-exempt account than for a taxable one.