From Biotech to...erm...Biotech

The closer I get to leaving full-time work the more yield-hungry I become.

Yet like many investors I've learnt the hard way that eschewing 'growth' investments in favour of high current yield can impair the real terms rise in portfolio value which is a necessary condition of long-term prosperity (one day I will document here some of my ill-fated flirtations with high yield shares).

I've also suffered in relative terms in recent years from having very little exposure to technology companies among my fund and equity holdings.

Given that the Office for National Statistics life expectancy calculator estimates I will live for another 37 years I'm starting to ponder the wisdom of jettisoning all my zero-dividend paying 'growth' funds for income-generating vehicles.

In 2013 I invested in the much-vaunted biotech sector with a small 'punt' - and it was only ever a speculative adventure - in the Biotech Growth Trust (BIOG). Over the next three years the share price bounced from my entry point of 378p to nearly 900p in 2015, then to below 600p, before settling near 700p in September 2016.

Amidst concerns over a possible Clinton presidency clamping down on pharmaceutical pricing, in September 2016 BIOG's rival investment trust, International Biotechnology Trust (IBT) announced the introduction of a 4% dividend starting in early 2017, paid out of capital, and calculated on the trust's Net Asset Value of the previous August 31st.

Comparing the recent capital performance of the two trusts, if anything IBT has the edge over BIOG (e.g. over 3 years to 2nd December 2016 share price growth was 88% for IBT versus 65% for BIOG).

Some familiar biotech companies are common to each trust: e.g. Celgene, Biogen. The differences lie in BIOG's more concentrated, large-cap focus, with IBT having 14% in unquoted companies, against just 1.2% in unquoted for BIOG.

I recently switched my BIOG holding for IBT and look forward to receiving the first dividend in early 2017.

Of course paying a 4% dividend from capital may impair capital growth, but the opportunity to retain exposure to the biotechnology sector whilst earning a relatively attractive yield is too good to overlook.