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Woodford Patient Capital Leaves FTSE 250

Ejection of the investment trust from the mid-cap index is the latest blow to the manager, whose equity income fund gated three months ago this week

James Gard 6 September, 2019 | 12:41AM

Exit sign

Woodford Patient Capital Trust (WPCT) is one of the most high-profile casualties of the quarterly reshuffle of FTSE companies, with the under-pressure investment trust being ejected from the mid-cap FTSE 250 index.

The relegation caps a miserable summer for fund manager Neil Woodford, whose equity Income fund gated three months ago this week.  

The investment trust has taken the strain in recent months, with its share price falling from a close of 76.5p on June 3 to around 43p, a drop of 44%. The discount to NAV is currently more than 40%.

Woodford has sold off 60% of his own stake in the trust, whose board has admitted to looking at potential options for putting the trust under new management. This week the board announced that non-executive director Steven Harris, who founded one of the companies Woodford invested in, is to step down. 

Companies and investment trusts fall in and out of indices because of changes in their size and WPCT now has a market cap of £389 million. This affects how much passive funds allocate to particular stocks – in this case WPCT will no longer be part of FTSE 250 tracker funds and will receive smaller fund flows.

Index provider FTSE Russell says “the rules-driven, impartial quarterly reviews ensure the indexes continue to portray an accurate reflection of the market they represent”.

The FTSE 250 is home to some of the UK’s largest and longest established investment trusts, including Witan (WTAN) and F&C (FCIT). Being ejected from this cohort is a blow to Woodford, whose investment trust launched in 2014 and immediately entered the index. F&C, meanwhile, is on the FTSE Russell Group’s “reserve list” for potential promotion to the FTSE 100.

Excluding real estate investment trust, Gold-rated Scottish Mortgage Investment Trust is the only closed-end fund in the FTSE 100. Of course, a company that is ejected from an index can also be promoted again if there is a change in its fortunes.

Another FTSE 250 reject is loan company Amigo (AMGO), whose shares collapsed at the end of August. Woodford used to own 10% of Amigo but has since reduced his position. His holding is now below the 5% level at which fund managers have to notify the FCA.

Funding Circle, a high-profile peer-to-peer business lender that floated in October 2018, was also ejected from the FTSE 250 after a 75% share price fall. Companies in the consumer lending sector have struggled this year amid tightening regulation, a number of scandals and fears of recession.

In the latest re-shuffle by the FTSE Russell Group, retailer Marks & Spencer, which was in the FTSE 100 at inception, has been shunted down to the FTSE 250, along with Direct Line (DLG) and Micro Focus (MCRO).

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
F&C Investment Trust Ord726.00 GBX-0.41
Witan Ord215.75 GBX-0.58
Woodford Patient Capital Trust34.35 GBX4.89

About Author

James Gard  is content editor for Morningstar.co.uk

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