What you should make of Woodford's unquoted asset sale

by Jemma Jackson from interactive investor |

Here's our take on Woodford Equity Income Fund's sale of unquoted stock to Woodford Patient Capital.

On Friday, we heard that the Woodford Equity Income (WEIF) has sold some of the portfolio's individual unquoted stocks to Woodford Patient Capital Trust (WPCT) in exchange for shares in WPCT.

Dzmitry Lipski, Investment Analyst at interactive investor says: 

"This is a positive move from Woodford and should benefit existing and potential investors in his funds. Investors were concerned for some time about the size of assets managed and the liquidity of unquoted holdings of the open-ended income fund given the size of ownership stakes, and Woodford has listened. 

"So, transferring them to his Patient Capital trust, with a closed-ended structure better suited to illiquid assets, should help reduce risks and provide more clarity to investors. 

"Investors looking to benefit from a higher exposure to early-stage companies should consider Woodford Patient Capital trust which is not constrained by liquidity, while those looking for sustainable income should look into his open-ended income funds. 

"For income seekers, investors should also fully understand risks that come with the Woodford approach and how his income portfolio is built and managed. Woodford's recent underperformance highlights the importance of diversification in any portfolio. 

"Whilst none of Woodford's funds appear on interactive investor's Super 60 list of high-conviction investments, existing investors in his funds could blend them with other high-quality funds in the sector to gain broader, more balanced exposure to UK equity income, including Super 60 core fund Royal London UK Equity Income and the low cost Vanguard FTSE UK Equity Income Index."

Moira O'Neill, Head of Personal Finance, interactive investor says: 

"This move highlights yet again that when it comes to investing in unlisted assets, it's an open and shut case – the closed-ended structure of investment trusts is eminently more suitable. This is because fund managers of investment trusts do not have to sell stock to meet redemptions - unlisted assets can be notoriously difficult to sell. 

"There are several investment trusts that we like which have some exposure to unlisted assets, F&C Investment Trust and Scottish Mortgage being key examples. Among country specialists we like Fidelity China Special Situations, and all three of these funds form part of our Super 60 list."

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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