Woodford to sell out of blue chips in trust
25th February 2016 14:53
by Rebecca Jones from interactive investor
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Star fund manager Neil Woodford says he will sell the three remaining holdings in the in order to redeploy the capital into a growing pipeline of early stage investment opportunities.
Woodford says he will sell out of , and in the £790 million trust, freeing up around £33 million to invest back into new and existing holdings in early-stage and unquoted companies in the science and technology sectors.
This represents a major advancement of the manager's original schedule. During the trust's launch in April 2015, Woodford initially warned that it may take a year or more to fully deploy the capital into early-stage and unquoted companies - the trust's primary investment target.
However, the manager says that opportunities have been more abundant than he had anticipated, particularly in UK-based early stage medical science companies - one of his favoured investment areas.
"We launched this trust to capitalise on the wealth of scientific talent that we have in the UK and I'm pleased to say that we have been able to do that much faster than we originally anticipated," says Woodford.
He adds: "In the UK we are five times more productive than the US in terms of scientific research and development, but the level of investment pales in comparison and we are useless at commercialising the results."
However, the manager claims that there are signs that this dynamic is shifting, citing a recent capital raise for Oxford-based cancer drug developer Immunocore - the trust's largest holding at 5.6% of the portfolio - which attracted $320 million (£228.8 million) from more than 50 investors from the UK, the US and Europe.
New share issue
In August 2015 the board of Woodford Patient Capital announced its intention to issue new shares up to the value of 10% of share capital. Between August and September 2015 it issued 27 million new shares, taking total share capital to around £815 million as at 12 January.
Since then, however, the trust has seen its share price plummet, shedding nearly 14% between its launch in April and 24 February. At its peak, shares were trading at a 15% premium to net asset value, while today it is trading at a 1% premium.
The portfolio has been particularly hard hit due to its high weighting in biotechnology companies. A large holding in beleaguered US firm has been particularly detrimental, with allegations of corruption at the firm sending its shares plummeting by 65% in the 12 months to 24 February.
Woodford says that the board was still consulting on whether to issue more shares in the trust despite the fall in value of the current stock, commenting: "I'm a great believer in buying low and selling high. The assets we invested in are attractive and are more attractive now." However, the manager declined to give a timeline for any new issue.
On how the board would manage share price volatility in the future, Woodford says that it would look to buy back shares should the discount fall to a "significant level". However, he again declined to outline any specifics.
As at lunchtime on Thursday (25 February), shares in the Woodford Patient Capital Trust were trading at 90p, up from a low of 85.25p on 11 February.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.