Investments 

Woodford criticises 'aversion' to early stage companies

Woodford criticises 'aversion' to early stage companies

Neil Woodford has said the market has an "aversion" to early stage companies which has hampered the performance of the Woodford Patient Capital Trust.

Despite this, the £735m trust, which invests in early stage quoted and unquoted businesses, increased its net asset value by 6.9 per cent during 2018  in part due to investments in a biotech company and an energy business.

Mr Woodford receives no fee for managing the trust unless it gains 10 per cent in a year, something which has yet to happen.  

In its annual results for 2018 Mr Woodford said the unquoted businesses in the portfolio performed well, but the performance of the trust’s listed holdings had been "starkly different".

He said: "This is not a reflection of what has happened to those businesses; the decline in share prices was further evidence of the market's aversion to early-stage investment opportunities in the current environment.

"This situation has worsened since the company launched in 2015, but I continue to believe that it won't take much in the way of genuine commercial success from these businesses for the market and other investors (such as private equity and sovereign wealth) to wake up to the astonishing value on offer.

"Ironically, several of the more mature companies in the portfolio are now at a stage where a stock market listing would appear appropriate. Indeed, several of them are well beyond the stage at which, historically, an introduction to public markets would typically have occurred.

"We have encouraged these businesses to remain private for as long as possible. We are only comfortable exposing these businesses to the slings and arrows of a stock market listing if we are confident that it can be done in a manner that will not compromise their ability to fulfil the potential that we have always seen in them."

Mr Woodford said investments in Autolus, a biotech firm which is the trust's largest single holding, and Industrial Heat, an energy company, were key to strong performance during the year.

He wrote in the annual report that Altus shares had risen by more than 90 per cent since the company listed on the stock market, while Industrial Heat’s valuation also rose during the year.

Nearly a third of the portfolio - 65 per cent - is invested in unquoted businesses with 53 per cent invested in the healthcare sector.

Over the past three years the trust has lost 13.68 per cent while its sector, the AIC UK All Companies, gained 29 per cent.

david.thorpe@ft.com