Patient Capital strikes a chord

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Craig Newman 20 April 2015 Est. reading: 2 min read

The support from investors for the Woodford Patient Capital Trust has been quite incredible.

We have always wanted to minimise the chances of scaling back applications. This was a key reason why the Board recently took the decision to increase the share issuance to £800m. However, investor appetite was not the only factor we and the Board had to consider: it was very much a balancing act between the amount of capital raised and the Trust’s investment rationale and remit.

We needed to select an appropriate figure well within the level needed to manage the investment strategy and deploy capital in the 1-2 year period outlined in the original prospectus. The Board, in close consultation with Neil and his team, concluded that £800m was the optimum figure.

The level of investor appetite has exceeded our expectations and as a result the issue was just under 10% oversubscribed. As a result, applications have been scaled back in accordance with the terms set out in the prospectus. The level of scale back is far lower than would have been the case if the size of the issue had not been increased by £300m on 9 April 2015.

A look at conventional investment trust launches over the past couple of decades or so shows that a capital raise of more than £500m has been an extremely rare event. So to raise more than £800m to invest in a previously overlooked asset class is a tremendous endorsement of the patient capital strategy.

The Trust has struck a chord with investors and triggered healthy debates whether on our innovative fee structure or on our decision to publish a supplementary prospectus. I’d expect those debates to continue, but for now Neil and his team – with more than two-dozen early-stage and early-growth stocks in the pipeline – are looking forward to putting your money to work.

What are the risks?

  • Long-term outcomes are more binary – extremely attractive rewards for success but some businesses will inevitably fail to fulfil their potential and this may expose investors to the risk of capital losses
  • As it can take years for young businesses to fulfil their potential, this investment requires patience
  • The value of the trust as well as any income it pays will fluctuate which may partly be the result of exchange rate changes
  • The price of shares in the trust is determined by market supply and demand, and this may be different to the net asset value of the trust. This means the price may be volatile in response to changes in demand
  • The trust may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of investments to decrease or increase
  • The trust may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value
  • Young businesses have a different risk profile to mature blue-chip companies – risks are much more stock-specific, which implies a lower correlation with equity markets and the wider economy

Important information

We do not give investment advice so you need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser. The trust currently intends to conduct its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
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