Interactive Investor

Ian Cowie: signs of recovery or false dawn for ex-Woodford trust?

13th May 2021 09:56

Ian Cowie from interactive investor

Long-suffering shareholders were handed a boost last month, but our columnist is still nursing a 64% paper loss. 

Can it really be true that Neil Woodford plans a Cayman Islands-based comeback? Woodford prompted a Financial Conduct Authority (FCA) inquiry in London, then got the cold shoulder from regulators in Jersey after speculation that he might resurface there.

Now City chatter claims he is pinning his latest dreams of redemption on a Caribbean comeback. Call Woodford what you like but you can’t call him a quitter.

Never mind the personalities, though, what about the millions of pounds thousands of British investors may never see again? It seems that those of us who assumed the former ‘star fund manager’ had retired to spend more time with our money were wrong.

Others may place their hopes of compensation in the clueless FCA or sharp-eyed lawyers now circling the beleaguered bureaucrats. But this investor prefers to take responsibility for my own mistakes and, unlike Woodford’s useless open-ended funds, at least his investment trust is still trading.

And what a ride it has been recently. From a low-point of 23p last year, the investment trust originally called Woodford Patient Capital and since renamed Schroder UK Public Private Trust (LSE:SUPP) hit a peak of nearly 40p last month before slipping back to 33p this week.

So the important question now for long-suffering SUPP shareholders is whether we are seeing the first green shoots of recovery or what City cynics call a ‘dead cat bounce’. Most hopes for the former outcome are focused on SUPP’s second-biggest holding; Oxford Nanopore, an unlisted biotechnology business in which nearly 18% of the trust’s £425 million remaining assets are invested.

Oxford Nanopore prompted SUPP’s share price to spike in March after the DNA sequencing specialist announced plans for its own stock market listing later this year. That prompted the investment bank Jefferies to speculate the initial public offering (IPO) might raise £3.9 billion, which - if correct - would be one of 2021’s largest flotations in London.

Hopes of a biotech boost for SUPP were fanned further this month when Oxford Nanopore said it had it raised £195 million from institutional investors including Temasek, the Singapore sovereign wealth fund; Wellington Management, an American investment firm; M&G Investments; and Nikon, the Japanese camera company.

However, the gene sequencing company has always emphasised that its IPO plans are “dependent on market conditions”. Last year these seemed favourable as the coronavirus crisis helped Oxford Nanopore gain government contracts worth £140 million, or nearly three times its 2019 revenues of £52.1 million.

This helped diminish fears that it is just another ‘jam tomorrow’ company that may disappoint if it fails to deliver. Since then, recent worries that commodity price inflation may prompt central banks to curb quantitative easing sooner than expected hit most share prices, including SUPP.

Of course, Oxford Nanopore is not SUPP’s only hope and this trust has several other promising early stage biotech and healthcare assets. More than 21% of SUPP is invested in Rutherford Health, which builds and operates oncology centres.

Other top 10 holdings include BenevolentAI, which aims to use artificial intelligence for drug development; Immunocore (NASDAQ:IMCR), which seeks a cure for cancer and is listed on Nasdaq; and IDEX Biometrics (NASDAQ:IDBA), a Norwegian developer of finger-print sensor technology.

Who can put a price on a potential cure for cancer - or even just better treatment for sufferers? Much the same could be said about other pharmaceutical pioneers in SUPP’s eclectic portfolio.

Against all that, I am less optimistic about its third-largest holding, ATOM, Britain’s first branch-free, app-only challenger bank. Long-established rivals have digital technology, too, and the comparative advantage for fintech is fading.

Similarly, Reaction Engines, also a top 10 holding, hopes to propel aircraft at five times the speed of sound with its Synergetic Air Breathing Rocket Engine - or SABRE, for short. Snigger if you must but, to be fair, science fiction can sometimes turn into fact. Even so, perhaps this sort of thing is best left to those with deeper pockets - such as Elon Musk or Jeff Bezos. Both billionaires are in a different league from a mere multi-millionaire, like poor old Woodford.

Six years after I invested at 100p per share and topped up at 75p in March 2018, I am nursing a 64% paper loss. Ouch. The only thing I got right with SUPP was never investing as much as 1% of my ‘forever fund’ in this dud. That makes it easier to hang on in hope and avoid despair.

Schroders might yet find something of value in the wreckage of our dreams about commercialising British universities' innovation. After investing on a 10-year view back in 2015, I am not quite seven-tenths of the way there yet.

Here and now, on the basis that it is always better to laugh than cry, SUPP and some of the madcap schemes it invested in remind me of the tale about a man who claimed to have found a foolproof system to beat the bank at Monte Carlo.

He raised cash from his friends and went off to place his bets in the casino. Hearing nothing more from him, they eventually asked how he was getting on. Back came the reply: “System working. Send more money.”

Ian Cowie is a freelance contributor and not a direct employee of interactive investor. 

Ian Cowie is an investor in Schroder UK Public Private Trust (SUPP) as part of a globally diversified portfolio of investment trusts and other shares.

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