Patience starts to pay off as fund buys back into Woodford

FUND manager Neil Woodford, much derided by experts and investors for failing to deliver stellar investment returns since going it alone four years ago, has received unexpected backing from a rival investment house.

Seneca Investment Managers has taken a stake in Woodford Patient Capital some three years after it sold an earlier holding claiming at the time that the investment trust was overvalued.

It says a ‘distinct improvement’ in the news flow surrounding the fund’s holdings has prompted it to buy back into the trust.

Patient Capital was launched in spring 2015 with Woodford promising to make returns for investors by backing some of Britain’s most promising fledgling companies. It attracted £800 million of investors’ cash and for a while the trust’s shares performed well, trading at a double- digit premium to the value of the underlying assets. But as the hype died down, both the trust’s share price and the value of the assets fell back.

Although the trust’s shares still trade at below their 100p launch price, they have gently picked up since the end of last year – and the discount has narrowed.

Liverpool-based Seneca initially sold out in late 2015 making a profit of close to 20 per cent for Seneca Diversified Growth, a multiasset fund. It then bought back into Patient in November last year when the shares were trading at a 16 per cent discount to asset value, compared to 11 per cent now. One per cent stakes were built in Diversified Growth and sister fund Diversified Income. Richard Parfect, fund manager at Seneca, says the decision to reinvest was made on the back of a stream of good news surrounding some of the key investments in Patient Capital’s portfolio. For example, the wider use of proton beam therapy in the treatment of UK cancer patients, a process pioneered by Patient holding Proton Partners International. Other key stakes to benefit from good news include Oxford Nanopore Technologies – at the forefront of DNA sequencing – and biopharmaceutical company Autolus.

Parfect says: ‘We did our homework and met with Woodford in November. It was only after that meeting that we decided to commit money to the trust.’ He now hopes that the trust’s share price will keep improving as the underlying companies in the Patient Capital portfolio ‘gain traction in their longterm business plans’.

On Woodford, he says: ‘The high level of criticism he has faced is an inevitable result of having been put on a pedestal. Such swings in emotion create a dislocation between price and value.’

Over the past year, Woodford Equity Income and Income Focus have delivered respective losses of 10 and 11 per cent.