Not everyone is a fan of Woodford Patient Capital

Not everyone is a fan of Woodford Patient Capital

There has been plenty of hype around star manager Neil Woodford’s new investment trust. 

This is reflected in the numbers. Woodford Patient Capital Trust (WPCT ) raised £800 million, making it the UK’s biggest trust launch, after Woodford Investment Management hiked the fundraising limit due to a surge in demand.   

Shares in the trust have edged to a healthy premium of around 5% thanks to this enthusiasm. But not everyone has rushed to buy the fund, which will invest in early stage, quoted and unquoted companies including biotechnology stocks.

Citywire columnist Mike Deverell, a partner at financial advisers Equlibrium Asset Management, said he was worried about the size of the trust given the sort of companies in which it will invest.

‘Long term it should do well, but I am wary about the fact that biotech has done really well and you have a lot of people investing in something they would not invest in normally. What that will mean is that investment trusts investing in this sector could be massively volatile,’ he said.

‘Also, £800 million worth of decent opportunities will be very hard to find. They are going to struggle to find enough good companies to invest in. On a positive note, he should be able to get good prices simply because of who he is. Companies know a Woodford investment will look good to other potential investors.’

One of the more vocal sceptics in the run-up to the trust’s launch was fund group Hawksmoor Investment Management, which branded the trust ‘the trendiest show in town’. 

Other opportunities

Managing director Philip Milton likened the hubbub surrounding the Patient Capital launch to the privatisation boom in 1994, which resulted in the £549 million launch of the Mercury European Privatisation trust and £481 million peer Kleinwort European Privatisation. Those had been the UK’s biggest trust launches until Woodford Patient Capital’s debut.

After struggling to deliver, the Kleinwort trust wound up just two years later, while the Mercury trust lasted only five years before changing its mandate, then winding up in 2004.

‘I have a lot of respect for Neil Woodford,’ said Milton. ‘As far as this trust is concerned, it is a salesperson’s dream. We will not be supporting this. We like trusts, but the primary reason is there remain plenty of other opportunities at significant discounts.’

Milton is also sceptical of the trust’s focus. ‘The Woodford trust does not have an especially clear mandate. Is it investing in biotech or big pharma? I am a bit fearful Joe Public will buy this and not understand it.’

Glen Avis, investment manager at Charles Stanley, has invested but is braced for possible short-term disappointment.

‘I look back at Anthony Bolton when he tried his hand with that China Special Situations trust,’ he said. ‘There was an awful lot of hype around that but it ended up falling flat on its face,’ he said.

‘I feel markets are a bit over-egged at the moment, so there is the potential for a pull back. And Woodford is going into an area he is perhaps not as experienced in, though he has delved into it before. If you have long-term aspirations and you invest in it you should probably do quite well.’


Thursday, April 30th, 2015 EN

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