InvestmentsJun 10 2019

Woodford trust board keeps faith as share price collapses

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Woodford trust board keeps faith as share price collapses

The chairman of the £941m Woodford Patient Capital trust has reassured investors she is "closely" monitoring the portfolio's performance, after the suspension of Neil Woodford flagship fund caused the trust’s share price to collapse.

Woodford Patient Capital's share price has fallen from 77p to 63p over the past week, a drop of 18 per cent. The discount at which the trust trades to its net asset value has increased to 26 per cent.

This follows Mr Woodford's decision to suspend his £3.7bn Equity Income fund last week as he dealt with a surge in redemptions.

In a stock market announcement released this morning (10 June) the trust's board said it was happy with the performance of the individual companies in the portfolio.

Susan Searle, the trust's chairman, said: "The board is closely monitoring the situation and is engaging with its shareholders and advisers. Separately, the board is in regular dialogue with the portfolio manager. The board wishes to emphasise the long-term approach of the company and will continue to keep shareholders updated as necessary."

She said the companies within the trust's portfolio had the potential to deliver "attractive returns", in line with the trust's long-term mandate.

Despite this, several investment trust buyers and analysts to whom FTAdviser has spoken indicated they did not regard the shares as a buy at this time.

This is because about two thirds of the holdings in Patient Capital are also held by the Equity Income fund. Mr Woodford is selling investments in Equity Income to raise cash to meet redemptions, and those trust buyers expect he will struggle to get a proper price for the investments he is selling, as the market knows he is a forced seller.

By accepting the lower price, the market believes this will force the value of the same investments held in the Patient Capital trust down, justifying the present discount between the share price and the value of the investments.

Over the past three years, Woodford Patient Capital has lost 34 per cent, while its sector, the AIC Growth Capital, has lost 11.5 per cent.

Its performance has been stronger more recently, with the trust losing 1.8 per cent over the past three months, while its sector lost 22 per cent.