Woodford Patient Capital’s performance has picked up over the last three months and Woodford is optimistic it will continue.
When the Woodford Patient Capital trust launched in April 2015, it attracted a large group of investorsthanks to the reputation of its fund manager Neil Woodford. But for the first two years the trust’s performance disappointed and its discount widened.
Over the last three months, however, performance has picked up and the trust returned 10.6 per cent.
In Patient Capital’s half-yearly results, Woodford said: ‘I remain very confident that this portfolio will deliver the attractive double-digit annualised returns that we set out to deliver.’
At launch, Woodford had originally targeted returns of 10 per cent plus. He backed this conviction by putting in place a ‘no win, no fee’ charging structure.
With this fee model, the trust charges an annual performance fee of 15 per cent of any excess returns over 10 per cent, which is its target cumulative annual return. When the target is missed, investors will not pay a performance fee.
Addressing investors, Woodford previously acknowledged that 2016 was a challenging year, but was keen to stress the long-term strategy of the trust.
The trust invests in early-stage and unquoted companies, 87 per cent of which are in the UK. The largest contribution in the first half of this year came from online estate agency business Purplebricks.
It is the second largest holding in the portfolio at 10.9 per cent, and in the first half of this year, shares in Purplebricks more than trebled in price.
Woodford said the business ‘successfully executed their ambitious plans to dominate the UK’s nascent online estate agency industry, while at the same time, significantly disrupt the traditional estate agency model.’
Prothena is another large holding in the portfolio with 14.3 per cent. It’s a US-based biotechnology company focused on discovering, developing and commercialising therapies directed specifically at disease-causing proteins.
Meanwhile, shares in 4D Pharma declined, ‘despite continued positive progress in the development of its live biotherapeutic therapies,’ says Woodford.
‘Similarly, ReNeuron also declined, despite the fact that the company announced very positive data in its stroke trial. In each of these instances, we remain very attracted to a long-term commercial opportunity that is being substantially overlooked by the market.’
Previously Woodford had argued that he could see the fundamental progress the businesses in his fund were delivering and that it was only a matter of time before this was reflected in valuations.
He concludes: ‘It is pleasing that this has started to come through in terms of performance but the best is yet to come, in my view.’
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