The board of the Patient Capital investment trust continues to be “in dialogue” with rival fund managers with a view to replacing Neil Woodford.
Mr Woodford is in the awkward position of having to get the approval of the trust’s banker, Northern Trust, before he can make any new investments.
This is due to the level of debt in the trust, and the recent spate of downward revaluations of some of the trust's assets.
In the half-year report of the trust, released this morning (September 30), the board confirmed that it is reviewing the manager’s role and that the debt level has fallen to £111m.
The board wrote it “continues to evaluate the position of the Portfolio Manager and remains in dialogue with other potential managers."
In September, Mr Woodford refinanced £113m of debt in the trust in exchange for a higher level of interest, while he also agreed to sell some positions in unquoted companies in order to get the overall debt level down.
The board had ordered an independent review of the trust’s twenty largest unquoted investments, and, with several of those investments having had their value written down, the review is now complete.
The Patient Capital trust has lost 46 per cent of its value this year to date.
In this morning's statement Mr Woodford wrote: “Shareholders have endured an extremely disappointing six-month period, for which I am very sorry.
"While shareholders can be forgiven for thinking there are no positives, I continue to believe that the majority of the businesses we have invested in are making good progress, in line with our pre-agreed milestones.
"This is not to gloss over the setbacks which the portfolio has suffered since WPCT was launched in 2015, nor the significant downward pressure both the NAV and share price have endured since the suspension of the Woodford Equity Income fund on 3 June 2019.
"The journey to positive outcomes has been longer and more painful than investors would have liked, or anticipated, but the returns to be gained by delivering on the progress, I believe, will ultimately reward the patient investor."
The suspension of the Equity Income fund has meant the fund manager has been selling assets in that fund to raise cash, this includes the sale of some unquoted an illiquid holdings, pushing down the valuations of some of the holdings, and those businesses are also held in the investment trust.
The fund manager has made a number of investments in FTSE 100 companies in his Equity Income fund the shares of which are very liquid and so allow him to raise cash quickly if he needs to as he aims to open the fund in December.
However two of the FTSE 100 companies in which Mr Woodford invested, Imperial Brands and IAG, issued profit warnings last week, causing the share prices to fall.
david.thorpe@ft.com
