Neil Woodford's billion-dollar baby turns four

by Jemma Jackson from interactive investor |

We use Patient Capital's fourth birthday as a chance to share our view on Woodford's middle child.

On 21 April, Woodford Patient Capital (LSE:WPCT) will turn four. Having weighed in at launch at £800 million, making it the second-largest UK investment trust launch ever after Smithson Investment Trust (LSE:SSON), according to the AIC, Woodford's middle child has had some high-profile teething issues along the way. Total assets today stand at just over £1 billion.

Whilst it's still relatively early days for the strategy, next week's anniversary falls squarely in the middle of the patient, three-to-five-year time frame that Woodford has often referenced. So, it's an appropriate milestone to take another look at the strategy.

Dzmitry Lipski, Investment Analyst, interactive investor, says: "Investment trust IPOs have had a chequered history over the years, but the clue with Patient Capital has always been in the name, and we still think patience is absolutely key.

"With this investment trust sitting on a double-digit discount, investors who came on board at launch will be nursing the double whammy of a widening discount and a falling share price – painful stuff. But now is not the time to abandon this strategy.

"With many of the holdings being high risk/ high reward unquoted companies, and with a gearing level of around 16%, this was always going to be a racy holding – and the path was never going to be smooth.  This is something that Woodford acknowledged from the get go, with an innovative charging structure.

"It is often forgotten that this trust does not levy an annual management fee and Woodford has shared every bit of the pain with investors. Only when the trust performs well is the manager rewarded – the fund charges a performance fee of 15% net asset value (NAV) returns above 10% per annum with a high-water mark. This is pretty unheard of in the fund management world, and Woodford deserves credit for this.

"Investors with the required patience must, however, fully understand this is a high-risk strategy. The manager invests in early stage disruptive growth companies, taking high conviction positions and holding them for the long term. It is not a company that should be compared to its peers, but is instead one to tuck away for the long-term in the bottom drawer."

Discrete % returns

  22/04/2015 - 21/04/2016 22/04/2016 - 21/04/2017 22/04/2017 - 21/04/2018 22/04/2018 - 16/04/2019
Woodford Patient Capital Trust -5.1 1.3 -8.1 11.4
FTSE All Share -5 16.3 7.8 4.8

Source: Morningstar Direct

Past performance is no guide to the future and the value of investments can go down as well as up and you may not get back the full amount invested. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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