The board of the Woodford Patient Capital Trust is looking to give Neil Woodford more rein to provide follow-on funding to unquoted companies in the troubled investment trust as he retains his role as its manager.
The investment trust revealed a £232m loss for H1 in its interim results with its net assets falling from £807m to £654m, bolstered by the share placing that faciliated the stock swap with Woodford Equity Income. In the period since, assets have fallen further to £591m.
The board is also mulling pricing NAV on a monthly or quarterly basis instead of daily as it does now.
“I understand why many investors have lost their patience and I have never shied away from the fact that I will be ultimately judged on the returns I generate for investors and that remains true to this day,” said Woodford in the portfolio manager’s report. He described it as a “painful” period and reiterated his apology to investors.
The board reiterated that it is talking to other managers. “This process can take time,” said chairwoman Susan Searle.
Problematic funding commitments
Searle said the board was considering amending the investment policy so Neil Woodford can take exposure to unquoted companies to 80% of geared asset value.
This would allow Woodford to provide follow-on funding for existing holdings and provides wriggle room if they are revalued upwards, a spokesperson said.
Follow-on funding has already caused problems for Woodford since the Equity Income fund suspended in June.
Even as the equities manager moves to improve liquidity in his Equity Income fund he has been stumping up money for Rutherford Healthcare, previously Proton Partners. In February, he committed £80m in further funding, £47.5m of which he has handed over so far.
WPCT shareholders will have the chance to vote on the changes if the board decides to press on with the proposals.
‘Throwing good money after bad’
AJ Bell head of active portfolios Ryan Hughes thought the proposal would be a “difficult sell” to investors “because some will view it as a case of potentially throwing good money after bad”.
Changes to the frequency of NAV pricing had more logic and were in line with peers that also have large unquoted exposure, said Hughes. “If investors are taking the daily NAV with a pinch of salt, you might as well move it to a situation where there’s a little bit more certainty around the NAV,” he said.
The proposal appeared in a section of the half-year results in which Searle outlined how the board was addressing its “uncomfortable” level of gearing. Searle pointed to the agreement the board had reached with Northern Trust to allow some flexibility for Woodford to breach gearing limits on the proviso it must pre-approve any investment.
WPCT also addressed how the suspension of the Woodford Equity Income fund affects its NAV.
“Where such disposals by WEIF are considered a ‘forced transaction’, it is not necessarily expected that the company’s assets would be marked to the same value,” Searle said. “In the case of an ‘orderly transaction’, the sale by WEIF may present a new valuation metric for the asset.”
Board turnover continues
WPCT has further bolstered its investment trust experience on the board with Raymond Abbott the latest appointment, replacing Louise Makin, according to the results.
Abbott is chairman of Foresight 4 VCT, as well as Scottish Building Society and Integrated Environmental Solutions and was recently appointed chair of the advisory panel for the North East Fund.
The results said Stephen Cohen and Jane Tufnell, who were both appointed this year, had already made “excellent contributions”.
The duo replaced Steve Harris and Carolan Dobson.
