Woodford Patient Capital Trust - Overview

Woodford Patient Capital (WPCT) has a concentrated portfolio of early-stage unquoted and quoted companies, focused on technology and healthcare, with high return potential and high levels of stock-specific risk. It is managed by Neil Woodford, one of the most high-profile fund managers in the country. The trust does not pay a dividend. Neil focuses on picking businesses that he believes have the chance to be successful through the use of new technologies and in whose management teams he has faith. The trust is a pure stock-picking play, with the manager paying no heed to sector or geographic concentration. The drivers of the companies should be secular developments in their fields, and fundamentally global in scope. The portfolio has become highly concentrated, although position weightings are no longer being published since the open-ended Woodford Equity Income fund has been gated. Most of the portfolio is now in unquoted companies. Since launch in 2015, the NAV total return performance has been disappointing, with the trust losing 20%, while the FTSE All Share has returned 22.5% over the same period. Since June 2019, WPCT has been affected by the issues in the wider Woodford Investment Management (WIM) business that have led it to fall onto a discount of 45%. One of the fears is that the manager may have to sell unquoted stocks in the open-ended fund which are also held in WPCT, and if he is seen as a forced seller or if this is a disadvantageous time in the development of the companies, this could lead to mark downs to the trust’s NAV. We note that one potentially attractive feature for investors is that WPCT has no annual management fee. Although there is a performance fee, it won’t be payable until the NAV reaches 146p – an almost 50% uplift to its current level. This means that investors will only pay the 0.18% ongoing charges until that mark has been passed. The possibility of a change of manager has been discussed by the board, and so it is worth noting that these advantageous fee arrangements might not be retained should a new manager be appointed.