Investments  

Fund manager explains why he backs Woodford

Fund manager explains why he backs Woodford

BMO Asset Management investment trust buyer Peter Hewitt is considering buying more shares in Neil Woodford’s Patient Capital investment trust, despite the fund's underperformance.

Mr Hewitt runs the £140m BMO Portfolio Trust, which invests in other investment trusts, as well as other funds that do the same.

He has a holding of more than 2 per cent in the Patient Capital investment trust.

Mr Hewitt said: "We bought it at launch, and you could probably say we were wrong to buy it then, as we paid £1 a share and they are currently 84p, but whenever I think like that I remember the name of the trust, Patient Capital, and remember that it is for the long-term.

"The trust is invested in a lot of early stage biotech and technology companies, and the performance has been much better in recent months, as the fundamentals of the companies the trust is invested in have started to perform, there have been a couple of disasters of course, but you will get that with the sort of companies Patient Capital invests in."

The Patient Capital investment trust has lost 17 per cent since launch in 2015, compared with a return of over 20 per cent for the AIC UK All Companies sector in the same time period.

But the trust is the absolute top performer in the AIC UK All Companies sector over the past year, returning 8.5 per cent, compared with 1.5 per cent for the average trust in the sector.

Mr Hewitt said: “I am going to be meeting with Woodford soon, and as it stands I am thinking the meeting is with a view to making a purchase of more shares. Some of the companies in the Patient Capital Trust portfolio really are exciting.”

Dzmitry Lipski, investment analyst at Interactive Investor said: “With many of the holdings being high risk/ high reward unquoted companies, and with a gearing level of around 16 per cent, this was always going to be a racy holding – and the path was never going to be smooth.

"This is something that Woodford acknowledged from the get go, with an innovative charging structure. It is often forgotten that this trust does not levy an annual management fee and Woodford has shared every bit of the pain with investors.

"Only when the trust performs well is the manager rewarded – the fund charges a performance fee of 15 per cent  on net asset value returns above 10 per cent per annum with a high-water mark. This is pretty unheard of in the fund management world, and Woodford deserves credit for this.

“Investors with the required patience must, however, fully understand this is a high-risk strategy. The manager invests in early stage disruptive growth companies, taking high conviction positions and holding them for the long term. It is not a company that should be compared to its peers, but is instead one to tuck away for the long-term in the bottom drawer.”