personal finance

Woodford Patient Capital: patience runs out


The slamming of stable doors is deafening after investor confidence in Neil Woodford bolted for the horizon. Apologias from Andrew Bailey, boss of the Financial Conduct Authority, are just the start of it. The board of Woodford Patient Capital, a technology investment trust, may sack its eponymous founder as fund manager.

It should. Conflicts were clear in the trust’s purchase of stakes held by Equity Income, Mr Woodford’s struggling flagship fund, in March. The board will find it harder to resolve another issue the Financial Times has highlighted since 2015. Thanks to Mr Woodford’s fame, small investors piled into a fund unsuitable for many of them.

The fund manager made a lot of money for private investors from blue-chips when he was at Invesco. WPCT, biased to illiquid stakes in early stage biotech companies, is much riskier. Yet almost one quarter of its shares are owned by hobbyist investors via Mr Woodford’s chief promoter, fund platform Hargreaves Lansdown, S&P Global data shows. Another quarter are held by private client brokers.

The clue to Patient Capital’s profile is in the name. But patience is now in short supply. The shares are 48 per cent below their peak, valuing the trust at £562m. The discount to net asset value is 26 per cent. As with an Italian bank, the stock price is a better gauge of underlying investments than NAV.

WPCT’s unquoted investments are only revalued every few months following such triggers as third-party stake sales. Some of these may come from the Equity Income fund, which has an overlapping portfolio. If the trust’s asset value mirrored the share price after such tweaks, debts of £150m would be about £35m higher than its rules permit. The trust would need a fire sale of its own to reduce leverage versus underlying assets.

A new fund manager would likely speed things up with a wholesale downwards revaluation. The FCA should examine how small punters ended up holding so much of the PCT, when the dangers were so obvious.

The Lex team is interested in hearing more from readers. Please tell us what you think of the WPCT in the comments section below



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