Woodford Trust Board Tries to Reassure Investors

The board of Patient Capital said it was happy with the trust's performance and that the performance of its holdings were not affected by last week's events

Holly Black 10 June, 2019 | 1:45PM

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Woodford Patient Capital (WPCT) has assured investors that the investment trust is not affected by the suspension and redemptions at its sister fund, Woodford Equity Income.

The closed-end trust launched in 2015 with a remit to focus on early-stage businesses, many in the biotech sector.

While the underlying performance of its assets has been decent (the net asset value has climbed 15% over the past year) its share price has plunged in recent days as the trust has been caught up in the furore around the Woodford Equity Income fund, which suspended trading last week as it struggled to cope with a flood of investor redemptions.

Woodford Patient Capital launched with a share price of 100p. Today the shares are trading just below 60p, down almost 20% from a week ago and a near-6% fall on Friday's close. The shares currently trade at a discount of 28% to their net asset value.

Today the board of the trust issued an announcement stating that it was pleased with the operational progress of the companies in its portfolio and believes they have the potential to deliver attractive returns, in line with the long-term mandate of the company. It added that the performance of the portfolio businesses is not impacted by recent events.

Susan Searle, chair of the board at Woodford Patient Capital Trust, said: “The Board is closely monitoring the situation and is engaging with its shareholder and advisers. Separately, the Board is in regular dialogue with the portfolio manager [Neil Woodford].

“The Board wishes to emphasise the long-term approach of the Company and will continue to keep shareholders updated as necessary.”

As Woodford Investment Management was plunged into chaos last week, some commentators speculated that the firm could be sacked from running Patient Capital Trust. Investment trusts have an independent board of directors in charge of appointing a fund manager to run the portfolio.

There has been criticism in recent months about the close ties between Woodford Patient Capital Trust and the open-ended Woodford Equity Income fund.

Earlier this year, the fund took the unusual step of selling a number of its stakes in unquoted companies to the Patient Capital Trust in a bid to reduce the proportion of the fund invested in illiquid assets to bring it in line with regulatory guidelines.

In return, the fund received shares in the investment trust. As a result of the unusual transaction, the Woodford Equity Income fund owns 9% of Woodford Patient Capital Trust.

Ben Yearsley, director at Shore Financial Planning, says: "Fundamentally, the board is correct that the trust is not affected. But, in the short-term, the share price is unlikely to recover as short-sellers betting against the trust drive the price down further."

Killik & Co says the derating of the share price represents the significant reduction in confidence in the fund manager over the past week and the uncertainty over how the large number of common holdings between Woodford Equity Income and Woodford Patient Capital will be handled as the manager restructures the open-ended fund. 

 

 

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
LF Woodford Equity Income C Sterling Acc87.59 GBP0.43
Woodford Patient Capital Trust42.95 GBX-2.05

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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