Woodford sells stake in trust as board considers dropping him

Neil Woodford has sold over half of his stake in Woodford Patient Capital Trust, as speculation grows that he may be dropped as manager.

Funds and Investment Trusts July 29, 2019 by Tom Bailey

Neil Woodford has sold over half of his stake in Woodford Patient Capital Trust (WPCT), as speculation grows that he may be dropped as manager.

The board of the trust has announced that it has been in talks with “select management groups” recently to discuss future management of the trust.

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The trust noted it would “engage with a broader range of third-party managers...which may or may not lead to a change in the company's management arrangements.

Separately, the board announced that Woodford has sold 60% of his stake in WPCT. Woodford sold 1,750,000 shares between in the first week of July, with shares trading at between 58p and 56.6p. The sale was justified on the grounds that the cash was needed by Woodford for personal financial obligations including a tax bill.

Numis Securities noted in response: “We are surprised that Neil Woodford needed to sell WPCT shares to generate liquidity of c.£1m (Woodford IM paid £36.5m of dividends to its shareholders in FY18). Despite the explanation provided, his sale of WPCT not something that is likely to be viewed positively by shareholders, in our view.”

Speculation that Woodford could lose control of this namesake trust comes two months after he was forced to suspend trading in the open-ended Woodford Equity Income fund.

The fund’s suspension and the subsequent fallout has tarnished Woodford’s reputation, with the manager losing his mandate for various other funds he managed, while WPCT’s share price suffered. The trust now sits on a discount of 34%.   

In particular, Woodford came under heavy criticism for the way he managed the fund. At the same time, the cross-over between Woodford Patient Capital and Woodford Equity Income has raised fears that the former’s performance could further suffer. 

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Woodford has also come under criticism for his company’s decision to continue charging a management fee for the income fund. However, Woodford does not a charge a management fee for WPCT, and recently announced that he would forego his own salary while the open-ended fund is in suspension.

Not all investors have lost faith in Woodford. As data from interactive investor recently showed, WPCT was the most purchased trust in June, with the number of buys nearly double those of Scottish Mortgage.

Many investors are likely to be betting on Woodford being able to improve performance and recover his reputation (as he has before). Others, however, may be holding out hope that the board moves to choose a new manager.

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it need never have happened - and NW was trying to do too much too quickly without sufficient delegation & proper controls & risk management (I speculate). Liquidity,timing and other factors contributed.

He may back however with a much slimmed down fund .....

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