Woodford Patient Capital halts fundraising amid market uncertainty

Neil WoodfordWoodford Patient Capital has suspending its fundraising, announced in January, amid continued uncertainty and lower liquidity in markets.

In its annual results, published today, the chair of the trust Susan Searle said: “With the continuing uncertainty prevailing in markets, now is not an appropriate time to raise capital. The board will, however, monitor the situation and advise shareholders of any developments.”

In a January market update the firm said it was “looking at ways it can raise additional capital in the year ahead.”

At launch the trust initially targeted £200-£500m of fundraising but this was increased to £800m following strong investor demand.

In August the board said that it could raise a further £80m after the trust issued a further £4.6m in shares.

Over its first year the trust’s net asset value dropped 2.6 per cent from 100p to 97.38p, mostly due to the large cap positions of the fund which are more exposed to market swings, Woodford says.

“It is still very early days for this long-term strategy and performance should be viewed in the context of the overall market environment since launch,” he says in the report.

For the period between April 2015 to 31 December 2015 the company’s net asset value underperformed its peers with a total return of -1.83 per cent compared to the average net asset value return of 3.85 per cent of the trust’s peers.

The firm will not receive a fee for managing the investment trust, as it has not reached the hurdle of annual returns in excess of 10 per cent, the report says. The ongoing charge for the fund is 0.1 per cent for the year.

Fund manager Neil Woodford says: “We have invested in some incredible businesses with massively disruptive technologies and high-growth potential. Some of these businesses may take a long time to fulfil their potential but the stock market is not well endowed with patience, particularly in volatile conditions.”

As a consequence, he says share price weakness can happen especially in businesses with no earnings or dividends and “relatively limited market liquidity”.

The trust has also changed its portfolio construction limits. At launch the trust planned to have 25 per cent invested in both mid to large caps and early-growth companies, and the remaining 50 per cent in early-stage companies. This has now shifted to between 15 and 30 per cent in both mid to large caps and early-growth companies and between 40 and 70 per cent in early-stage companies.

Currently 46 per cent of the portfolio is invested in early-stage companies, 23 per cent in early-growth companies and 30 per cent in mid and large caps. The fund is also split into 63 per cent quoted and 36 per cent unquoted.

Woodford says: “Looking ahead, 2016 is shaping up to be another challenging year for financial markets but we are tremendously excited about the long-term potential in the portfolio that we have built. The realisation of future long-term value will be determined by the fundamental progress made by the companies in which we have invested, not by market sentiment.

“Share price weakness in listed early-stage businesses tends, therefore, to reflect this lack of patience from investors, rather than a lack of fundamental progress by the companies. Therein lies the opportunity for patient capital to exploit. The portfolio is in excellent shape and we continue to view the future with great confidence.”