WC Whiner

H&Q Life Science: Hold On, Its Time Is Coming

I gave you a 1, and you deserve it.

One, unlike your interlocutor AI, you fail to mention that a fixed payout can lead to return-of-capital. When a closed-end fund returns capital, that is no longer a "dividend". You're just getting your own money back. You don't pay tax on it (nor should you -- imagine paying ordinary income tax on every bank withdrawal). All it does is reduce the fund's assets under management, as it is forced to sell holdings to return capital to investors. This is not, normally, a good thing. However, though I am almost loathe to note it, fixed-payout policies can have one salutary effect. Braindead yield buyers have a nasty tendency to start investing in them as if they were bonds whose "yield" were an actual coupon. The result can be rather preposterous premiums to NAV (cf CRF). A cynic might buy into any closed-end fund trading at a discount with a fixed-payout policy and hope that a few among them fall prey to this affliction.

Two, you do not mention fees. HQL charges 167 bps, vs BBH's 70 and IBB's 50 bps.

Now, I *like* HQL and its sister fund, HQH. At times I have used them for exposure, especially when they had double-digit discounts and I felt biotechs were unloved an potentially due for runs. I can even see investing in the hopes of being bailed out by the braindead yield constituency. However, to recommend them as serious investment vehicles over their alternatives without mentioning fees or the phrase "return of capital" strikes me as irresponsible, at best.