Live Q&A with Neil Woodford

The live Q&A has now closed.

Thank you for all of your questions today. Sorry if some of you had trouble posting straight away – there were a lot of questions! In the end more than 200 were posted.

We’ll work through the remaining questions with Neil and the team over the rest of the week. We’ll also be using some of them as themes for future blog posts. Once again, thank you for taking part.

Neil's getting ready to answer your questions, live for the next hour on the blog… https://t.co/EggjcT19ha pic.twitter.com/5ASyARXKQd

— Woodford (@woodfordfunds) March 14, 2016

Important information

The value of the fund and any income from it may go down as well as up, so you may get back less than you invested
Not to be considered as investment advice specific to your circumstances
Woodford clients may have positions in any stocks mentioned
Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority

Updated on 14 March 2016

Tagged with: q&a

The views expressed in this article are those of the author at the date of publication and not necessarily those of Woodford Investment Management Ltd.

Conversations

Thomas Lester 10 Mar 2016 at 4:47 pm

Hi Neil, I was wondering what your view on value investing is in the current climate? It seems as though there are two schools of thought depending on how full your glass is! Do you think that we are set for a rough time in the rest of 2016 given the fallout from China and the forthcoming referendum, or do you think the recent sell-off provides a good opportunity to buy good companies at cheap prices? Thanks, Tom Lester
1. Neil WoodfordModerator 14 Mar 2016 at 1:41 pm
  
  Hi Thomas,
  Thanks for your question. Value investing is always relevant – it never goes out of fashion. We’ve been saying for some time that the global economic backdrop is becoming increasingly challenging, not least because we have become more cautious on China. Additional political uncertainty across the globe is clearly not helping investor sentiment. Having said that though, we do indeed believe that the recent sell-off, which has in part corrected, offers an opportunity to add to a number of our holdings, especially in the healthcare sector.
  Kind regards
  Neil
Barry Miller 10 Mar 2016 at 4:47 pm

Mr. Woodford: You invested in materials science company Xyleco at your previous employment and in 2014 you indicated that you would buy this investment and all other investments in non-public companies that you made while there. What is your current attitude about these investments and specifically about Xyleco, which I have been following?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:37 pm
  
  Hi Barry,
  
  We are monitoring the progress of most of the unquoted companies that pre-date the creation of our new business, Xyleco included. Where we have been able to do so at attractive valuations, we have replicated that exposure for the new funds.
  
  Kind regards
  
  Mitch
  1. Jack McCarthy 05 Apr 2016 at 6:48 pm
    
    Good Day Mitch,
    I am also an investor in Xyleco. Not sure if you are aware thy recently purchased a 600,000 square foot facility for $30Million US in Washington State for production. Don’t understand why Invesco has discounted their valuation in the last report 12/31/15. Take their position and be a hero!
    
    Regards,
2. Jack McCarthy 05 Apr 2016 at 6:49 pm
  
  Good Day Barry,
  I am also an investor in Xyleco. Not sure if you are aware thy recently purchased a 600,000 square foot facility for $30Million US in Washington State for production. Don’t understand why Invesco has discounted their valuation in the last report 12/31/15. Any thoughts?
  Regards,
  1. Barry Miller 10 May 2016 at 5:10 pm
    
    Thank you very much for this information. I have much information including that they are licensed in that state as of Sept. 2015. I only noticed your comment this morning. I had thought that my question had been ignored. Nice if we could communicate, as we are both involved. barry barry @ gmail. Good luck and best to you. I expect the company to do great things.
    
    It is wonderful that this company provides this forum.
  2. Barry Miller 11 May 2016 at 2:50 am
    
    May I ask, how did you become aware of this?
Alain Coetmeur 10 Mar 2016 at 4:49 pm

Dear Mr Woodford,

Could you tell us your strategy around the nearly 50Mn$ invested in Industrial Heat, the LENR company created by Tom Darden, owning license of E-cat technology.

What is you position, beside this tiny investment, about the disruptive potential of LENR technology on other of your investments ?

On LENR technology, do you have planned a strategy ? Is it more like a hedging strategy, or a more positional strategy ?

Do you have other link, projects, or investment in LENR domain ?
Do you have relationship with LENRG ecosystem ? With Nukey ?

Best regards.
Alain Coetmeur aka AlainCo.
1. Paul FarrowModerator 15 Mar 2016 at 11:09 am
  
  Hi Alain
  Industrial Heat is currently working with numerous scientists and is acquiring both the technology and teams required to maximise the potential of new energy technologies.
  
  The company recently said that it is willing to invest time and resources to see if this technology might be an area of useful research in its quest to eliminate pollution. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
Anthony Rice 10 Mar 2016 at 4:52 pm

I have a substantial amount in Woodford Accumulation Fund, which is doing quite well and an equally large amount in the Patient Trust. That one rose to 120p but now down to 87p or around that figure, quite a substantial reduction. Have you any idea as to why investors have lost faith in it and what plans are in place to redress the situation. Thank you. A L Rice
1. Shashank Garg 11 Mar 2016 at 5:49 pm
  
  Ditto Neil – I like to know the same ?
2. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 3:25 pm
  
  Hi Anthony,
  
  Sorry we didn’t get to answer your question during the hour. Here’s what Neil had to say about a similar question.
  
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.”
  
  Kind regards
  Mitch
3. steve brewer 14 Mar 2016 at 9:04 pm
  
  Same question ,? Please Steve Brewer
tony julius 10 Mar 2016 at 4:53 pm

What would the effect of a Brexit be on Neil Woodford funds ?
1. steve brewer 14 Mar 2016 at 9:06 pm
  
  Yes ,I would like to know your thoughts on getting out of Europe.
  Regards and thanks Steve B
2. Neil WoodfordModerator 15 Mar 2016 at 3:00 pm
  
  Hi Tony, I believe the impact would be broadly neutral – in the short-term there might be some volatility but in the long-term, as our independent report concluded, the outlook for the UK economy doesn’t hinge on this decision and neither does the outlook for the funds. You can read more here: https://woodfordfunds.com/insight/brexit-economic-implications/
  
  We believe the funds’ are well-placed to deliver attractive long-term returns to investors whatever the referendum outcome.
  
  Neil
John Monk 10 Mar 2016 at 4:54 pm

Hi Neil, What are your thoughts on Lloyds bank shares,
1. Neil WoodfordModerator 14 Mar 2016 at 3:10 pm
  
  Hi John,
  In general, I remain very cautious about the investment attractions of the banking sector. With respect to Lloyds, albeit much improved and arguably more investable than at any stage since the crisis, it is still not sufficiently attractive to warrant a place in the funds. One thing that continues to concern me is the exposure to the UK housing market. Any correction here would shatter the consensual view that its balance sheet is rock solid.
  Kind regards
  Neil
Nicholas Reeves 10 Mar 2016 at 4:55 pm

Hi Neil, if we were to leave the EU, how in your opinion would the UK fair in the medium term, say 3-5 years?
Regards
Nick Reeves
1. Neil WoodfordModerator 15 Mar 2016 at 2:59 pm
  
  Hi Nick, we commissioned an independent report on this very issue, Nick. You can read it here: https://woodfordfunds.com/insight/brexit-economic-implications/
  
  In short, the outlook for the UK economy would be broadly unaffected by a decision to leave the EU.
Maxwell Gower 10 Mar 2016 at 4:57 pm

You published some thoughts on the economic implications for the UK of a possible Brexit shortly before the date of the referendum was announced. Since then a great deal has been published, and it is very hard to know what is fact and what is spin – not least as getting to the true underlying numbers is not easy. Have your views changed since the previous article, and if so, why?
Also, will not any further weakening of Sterling in the run-up (based on increasing uncertainty as voting day approaches) provide an extra shot in the arm for exports, which will mean a boost for the economy (and the Tories) post -election whichever way the result pans out?
1. Neil WoodfordModerator 15 Mar 2016 at 2:58 pm
  
  Hi Maxwell,
  
  My thoughts on this issue haven’t changed at all. Yes, weakness in sterling would indeed be a shot in the arm for exporters but whether it is enough to move the dial on GDP is another matter.
  
  Kind regards
  
  Neil
matthew Tricks 10 Mar 2016 at 4:59 pm

I was a bit surprised in the mini maelstrom of a month ago, that your fund actually got hit quite hard vs other income funds, when i would have expected it to hold up well given its defensive nature (heavily pharma, tobacco etc). It’s recovered now, and you sensibly probably ignore such dips in the road, but I was curious as to its cause. Was it the tail of your smaller stocks wagging the dog, or defensives getting sold off to step into capital goods.miners on their dip? If it’s the latter, why were defensives so, well…un-defensive?
1. Neil WoodfordModerator 15 Mar 2016 at 2:58 pm
  
  Hi Matthew,
  Healthcare has been very weak in the first few weeks of the year and the rally has been led by parts of the market to which we are not exposed, including mining and oil. It’s hard to explain why so-called ‘defensives’ have performed as they have done but it appears to have been driven by short-term positioning and rotational activity rather than a deterioration in fundamentals.
  
  Kind regards
  
  Neil
Josef Wolf 10 Mar 2016 at 5:03 pm

Hi Neil – Many thanks for doing this for us!

The FTSE100 hasn’t really recovered since the Tech Bubble in 1999, almost two decades ago. What sort of impact do you believe would there be to the UK markets (where many pension funds invest in), should the chancellor decide to tamper with the pension tax relief and as a result millions of investment will go elsewhere ?
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:53 pm
  
  Hi Josef,
  
  There would potentially be a negative reaction to such a decision but we wouldn’t expect it to be that dramatic. You are correct that pension funds do have exposure to the UK market but it is significantly less now than it was a generation ago – other asset classes now dominate institutional pension portfolios, including fixed interest, property, multi-asset and a long list of other esoteric assets.
  
  Kind regards
  
  Mitch
Art Chandler 10 Mar 2016 at 5:03 pm

Niel, thank you for doing this .. I have 2 questions
Commodity based investments oil and natural resources.. after precipitous declines in the last 1 to 5 years – have the “shorts” pushed too far? i.e. US Steel shorts late 2014 short interest went from 10% to over 35% in 2015- number of shares from under 50 million to over 250 million -stock has now bounced from $7 to $14 (NYSE)
AND
NW Biotherapeutics, now $1.50 (US) – I see from us govt, clinical trials web site they are projecting results from Phase III brain cancer treatments Sept 2016. Why do you own his stock and where do you feel this stock may be worth in the next 1 to 2 years
Respectfully
Art Chandler
Oregon, USA
1. Stephen LamacraftModerator 17 Mar 2016 at 4:05 pm
  
  Hi Art,
  
  Its not clear where the underlying price of commodities will end up and there are some strong arguments to suggest that on a medium-term view prices may have fallen too far. However, from a demand perspective the risks seem to be mounting and, as cost curves shift down to catch up with the price declines, the supply response is far from certain.
  
  As for Northwest Biotherapeutics, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.
  
  Kind regards
  
  Stephen
rajpal guram 10 Mar 2016 at 5:03 pm

Hi Neil
What is your prediction of dividend growth over the next 3-5 years for the fund?
Also what is the approximate free cash flow yield of the fund?

thanks
1. Neil WoodfordModerator 14 Mar 2016 at 2:20 pm
  
  Hi Rajpal,
  I would hope that we would deliver mid-single-digit per annum growth in dividends over the next 3 to 5 years. As an aside, overall dividends from the UK market will fall this year and won’t bounce back strongly, in my view.
  The free cash flow yield on the fund would be lower than you think because quite a few of the companies in the portfolio do not generate any cash. The number would be relatively meaningless.
  Kind regards
  Neil
  1. rajpal guram 14 Mar 2016 at 2:44 pm
    
    Thanks 🙂
des o'callaghan 10 Mar 2016 at 5:04 pm

Hi Neil,

What do you think is the main risk over the next 3-5years inflation or deflation?

Regards,
Des
1. Neil WoodfordModerator 14 Mar 2016 at 2:57 pm
  
  Deflation, deflation, deflation!
  1. Koo Li Mow Ching 14 Mar 2016 at 3:01 pm
    
    Hi Neil
    What would the impact of deflation be on the Equity Income Fund performance? Thanks you Marie
    1. Neil WoodfordModerator 15 Mar 2016 at 1:24 pm
      
      The portfolios are positioned for a deflationary environment. I believe the funds can continue to deliver an attractive long-term return, even in a period of deflation, but the market as a whole would probably struggle. You could argue that the attraction of decent dividend yielding stocks with secure and sustainable growth prospects is obvious in such an environment.
      Kind regards
      Neil
Ian Gould 10 Mar 2016 at 5:05 pm

WPCT – market close price 85.55p, what is the reason for the unexpectedly poor performance and when are things going to turn around?

-15% return is far from satisfactory.
1. Clive Smith 14 Mar 2016 at 1:40 pm
  
  Hi Ian, I share your concerns but more from a perspective of smaller holders speculating and not holding for say at least a two year period. This in my opinion is the the cause of a low price. The idea of “Patient Capital” appealed to me as a professional team has done the research and some of these investments are very worth causes like ReNeuron stem cell etc. But they need time to develop. I am confident in the longer term 3-5 year period we will see very healthy returns. But I would be interested in Neil’s comments here.
2. Peter Lewis 14 Mar 2016 at 2:36 pm
  
  I’m being patient as it is early days. PersonalIy I think it’s OK the price is down 15% like the market, and also OK if it is at a discount vs NAV.
3. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 3:28 pm
  
  Hi Ian,
  Sorry we didn’t get to answer your question during the hour. Here’s what Neil had to say about a similar question.
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.”
  Kind regards
  Mitch
Connor Davidson 10 Mar 2016 at 5:06 pm

Hi Neil,

Do you believe that the market is significantly undervaluing the option value of Drax Group’s assets if in the future spreads experience a reversion to the mean? Furthermore, would you consider Drax to be reasonably valued in the absence of such a reversion?
1. Neil WoodfordModerator 15 Mar 2016 at 3:01 pm
  
  Hi Connor,
  
  Yes I do, considerably so! And I think the lack of reserve margin in the UK generation market may mean that spreads widen sooner rather than later – demand is likely to exceed supply next winter! Even in the absence of such a reversion, I believe Drax is profoundly undervalued.
  
  Kind regards
  
  Neil
charlie hill-wood 10 Mar 2016 at 5:07 pm

what worries you most about today’s investment environment?
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 3:29 pm
  
  Hi Charlie,
  Sorry we didn’t get to answer your question during the hour. Here’s what Neil had to say about a similar question.
  “The thing that probably worries me most is a more violent implosion of the Chinese credit bubble, than I currently expect.”
  Kind regards
  Mitch
Mark Mdrrowan@aol.com 10 Mar 2016 at 5:08 pm

70-80-90-100

World output $70 tr, World stocks $80 tr, World oil consumption 90mm bpd, Fall in oil price $ 100 . All +/- 10%.

So if OPEC (40% of oil output) is losing 90*365*100*40% = $ 1.3 tr per annum, is committed to invest and can’t borrow as a junk credit, aren’t they going to have to sell a boatload of bonds/equities ( $ 6.5 tr over the next 5 years) ?

Clearly there are mitigating factors – but isn’t this in itself enough to instigate a bear market …. Or is it just a drop in the ocean?
1. Neil WoodfordModerator 15 Mar 2016 at 2:57 pm
  
  Hi Mark,
  Interesting numbers. I think it’s fair to say that sovereign wealth investors have already been net sellers in recent months and that may have contributed to the weakness in equity markets in early 2016. But that doesn’t necessarily mean it will continue, nor that a bear market is inevitable. Flow isn’t the only consideration – fundamentals are ultimately far more important in determining asset prices.
  
  Neil
Jeremy Gould 10 Mar 2016 at 5:15 pm

What potential “Black Swan” event scares you the most?
1. Neil WoodfordModerator 14 Mar 2016 at 2:04 pm
  
  Hi Jeremy,
  Without wishing to be trite, black swan events are, by definition, unpredictable. Having said that, the thing that probably worries me most is a more violent implosion of the Chinese credit bubble, than I currently expect.
  Thanks
  Neil
  1. Jeremy Gould 15 Mar 2016 at 10:30 am
    
    Thanks Neil, I feel I have been whacked in the face by a wet fish! However, I did put “potential” Black Swan event in an effort to glean what your worst fears might be in the investment world…..I accept it was poorly phrased!
Guy Macnaughton 10 Mar 2016 at 5:15 pm

Hello Neil,
Will you launch a UK income investment trust to sit alongside your fund for those investors that favour this structure?
Regards
Guy
1. Paul FarrowModerator 15 Mar 2016 at 11:07 am
  
  Hi Guy
  We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity that fit with our vision and culture.
Alma Jones 10 Mar 2016 at 5:20 pm

Hi Neil, How do you view oil and gas companies operating in the North Sea looking to the future with the depressed oil price. Regards Alma
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 4:25 pm
  
  Hi Alma,
  
  Sorry we didn’t get to answer your question during the hour we had. Here’s Neil’s response to a similar question, which suggests a note of caution towards all oil companies, including those operating in the North Sea.
  
  “As for oil, I remain cautious about the investment attractions of this sector. Whilst oil prices remain below $60-70 per barrel, the global integrated majors fail to generate sufficient cash flow to fund growth in the business and dividends. Currently dividends are being paid from asset disposals or by increasing borrowings. In other words, they are unsustainable unless oil prices rise significantly. In my view, oil market fundamentals do not support this sort of rally in the price of oil.”
  
  Kind regards
  Mitch
BARRY ELLIOTT 10 Mar 2016 at 5:22 pm

Good afternoon Niel,
What are your views on what would/could happen if Donald Trump gets in as President of USA.?

Barry Elliott
1. Neil WoodfordModerator 14 Mar 2016 at 1:48 pm
  
  Hi Barry,
  Donald Trump’s candidacy has clearly polarised opinion in the US. His popularity, in my view, is in part a product of the ongoing economic difficulties faced by many developed countries. Socio-economic groups that have not benefited from the recovery of the US economy since the financial crisis feel marginalised and are showing an increasing preference for ‘outsider’ politicians, like Bernie Sanders and Donald Trump.
  Trump’s more extreme political views on the campaign trail are likely to moderate significantly, if he were elected. In addition, the checks and balances in the US political system would clearly make some of his more extreme policy choices unlikely to prevail.
  My conclusion is, if he were elected, it would have a very limited impact on the US economy.
  Kind regards
  Neil
  1. Sam 14 Mar 2016 at 3:07 pm
    
    Trump could have big impact
    on U.S and the world economy.
    He will surely try to change things.
  2. Elizabeth Forbes 14 Mar 2016 at 7:01 pm
    
    This isn’t just a US thing – it’s pretty well everywhere and underlies the rise of ISIS at one extreme as well as ‘idiots’ like Nigel Farage, Boris Johnson, Michael Howard (‘something of the night’ still), Michael Gove – what a team of potential leaders. And it’s those who have benefited, too, who can see that continuing to impose ‘economies’ on everyone from junior doctors to the disabled while ‘giving in’ to the lobbyists against a totally commonsense (and hardly impoverishing) move to rebalance the advantage of pensions – well, I’m not alone in being flabbergasted that politicians and indeed leading investors don’t seem to see the seeds of revolution in this.
    
    What do you do with a Chancellor who thinks anyone on income support can afford to put £50 a month into a savings pot? And what would his supporters think if they did – that they were getting too much income support, is my guess.
    
    What is Neil doing to counsel against further tens-of-millions ‘compensation’ packages?
tudor davies 10 Mar 2016 at 5:27 pm

Hi, although you say you can find pockets of value in UK shares, your “big picture” view seems to be that the large cap market is overvalued and risks are to the downside. With this macro view, why not buy some FTSE100 put options as (fairly cheap?) insurance for the fund.
1. Neil WoodfordModerator 15 Mar 2016 at 2:56 pm
  
  Hi Tudor,
  
  This is something that I have considered occasionally at times during my career. I have always decided against it, however, because it would be a short-term call on the overall market level and would contradict the long-term confidence that I have in the portfolio and its underlying constituents. As you rightly point out, there are pockets of value and the funds are exposed to these areas, not the wider market.
  
  Kind regards
  
  Neil
Ian Hunter 10 Mar 2016 at 5:29 pm

Dear Neil, would you comment on two matters concerning the Patient Capital Trust.
One, whether the possibility of issuing yet more shares in this closed-end trust has been abandoned for now, given the sharp contraction of the premium and the share-price when this intention was floated – a fall of approximately 35% – peak to trough.
Two, given the large weighting in unlisted securities within the portfolio why has the underlying NAV performed so poorly as unlisted security holdings are surely extremely conservatively valued and should not therefore be affected at all by movements in the quoted markets and therefore the listed securities in the relevant indices. Surely their valuations should have remained constant resulting in better performance than has been experienced, unless of course the quoted stocks have performed so poorly that their unquoted counterparts have had no impact.
Some transparency and explanation on these points would be very welcome. Rgds, Ian Hunter
1. Neil WoodfordModerator 15 Mar 2016 at 3:01 pm
  
  Ian,
  
  Regarding the fundraising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon. The trust’s maiden annual results are due out imminently and will contain a comprehensive overview of performance to year end. This and our monthly updates provide an ongoing commentary on the trust’s progress.
  
  Most of the unlisted assets are still held at the value at which we initially invested. There have been one or two early successes and the operational performance of this part of the portfolio has been very encouraging. Indeed, our initial expectations for the underlying performance of many businesses in the portfolio have already been exceeded.
  
  The quoted element of the portfolio has been impacted by the sell-off in biotech shares and other areas of healthcare, both here in the UK and in the US. We think this is the result of rotational positioning and perhaps some intensification of shorting activity. Very little has been prompted by fundamentals.
  
  As I have said elsewhere, this is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.
  
  Regards
  
  Neil
constance vd merwe 10 Mar 2016 at 5:31 pm

Hi Neil,

You’ve stated that your preferred holding period (in the vein of Buffett) is forever.

Considering Tobacco will come under increasing (if still gradual) global regulatory pressure and the recent outcry against Pharma’s general pricing structure (particularly in the US), in the very long-term: are these sustainably attractive investment sectors in your view or could you foresee dumping them in, say, 20 years?

And which of these two do you reckon will suffer the most on the long-view in view of regulatory- and public scrutiny? Thanks
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:52 pm
  
  Hi Constance,
  
  We are long-term but twenty years is a very long time, making it extremely difficult to forecast with any degree of certainty. Having said that, Neil has been a significant investor in the tobacco sector for well over twenty years.
  
  All I can say is that we can foresee potentially ‘dumping’ any stock or sector on a twenty year view – the same applies over shorter time periods. If the fundamentals change and the overall investment opportunity evolves, we will of course consider selling existing holdings to make way for new investments that we view as more attractive. However, the significant presence of tobacco and pharmaceutical companies within the portfolio at present should suggest that we do not anticipate needing to do that any time soon.
  
  Kind regards
  
  Mitch
Mitchell Fraser-JonesAuthor 10 Mar 2016 at 5:32 pm

Here’s a selection of your questions so far – we’ll save the rest for Monday – Neil is looking forward to responding to as many of them as possible. In the meantime, keep them coming!
Amit Thaper 10 Mar 2016 at 5:34 pm

Hi Neil,

Can you provide us with an update on your current thoughts regarding Northwest Biotherapeutics, particularly with regards to the ongoing investigation and how that might impact your investment.

Secondly, can you share your thoughts regarding UCL’s recent T-cell based immunotherapy discovery, and potential impact on Northwest.

Thanks,

Amit
1. Neil WoodfordModerator 14 Mar 2016 at 2:28 pm
  
  We were pleased that the Northwest board appointed an independent committee to investigate the unsubstantiated claims made in the anonymous so-called research reports. We await the product of that investigation. That aside, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.
  1. Robert Dwek 14 Mar 2016 at 2:55 pm
    
    But why didn’t you invest in its most recent fundraising ? Sorry if I’ve got my facts wrong but if true, that surely reveals a lack of confidence in NWBO, after you bought in at much higher prices than today ? Thanks in advance for clarifying.
    1. ian wick 14 Mar 2016 at 6:58 pm
      
      Response to this question?
    2. Paul FarrowModerator 15 Mar 2016 at 10:44 am
      
      Hi Robert
      As you are aware we have engaged with the board and in a public filling to the US Securities and Exchange Commission, we called for the appointment of an independent non-executive director and the convening of a special committee to investigate the allegations of financial improprieties and regulatory failure. Accordingly, the company has initiated an investigation and we await its findings.
      
      As Neil replied in yesterday’s live Q&A, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.
  2. eric kagan 14 Mar 2016 at 2:59 pm
    
    Thank you. I have never seen a stock as manipulated like this one. I truly believe they have something great there
Kathryn Entwistle 10 Mar 2016 at 5:34 pm

Hi Neil and everyone, I’ve recently started lending via the P2P company Ratesetter, which I later (happily) read you were invested in 🙂 I’m wondering what may happen when the IF ISA comes in, whether rates of return are likely to dip much due if many more people have confidence to come on board as lenders. What’s your best guess? Thanks for your time!
P.S. I’m ordering a crystal ball for my 50th birthday.
1. Paul LamacraftModerator 18 Mar 2016 at 1:42 pm
  
  Hi Kathryn,
  
  My view on this is that we wait to see how ISA approval impacts the market. I would hope that as peer to peer lending becomes more accepted as some of these platforms gain FCA authorisation then more funding becomes available through the platforms. If the balance of supply and demand remains consistent and the risk assessment doesn’t change then we would expect to see returns remain consistent and defaults also to remain consistent. This is, however, a relatively new sub sector so we continue to monitor the area closely.
  
  Paul
william barr 10 Mar 2016 at 5:34 pm

Does Neil see a problem in the strength of the economy always being measured by GDP?
GDP seems like the top line of a set of accounts and doesn’t necessarily have much to do with the country getting richer or poorer. If every citizen bought a dozen bottles of champagne then GDP would ago up but wealth would not. Do we not need to combine it with balance of payment and increase/decrease in net borrowing to get a full picture?
William Barr
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:52 pm
  
  Hi William,
  
  Good question. We don’t view GDP as a ‘perfect’ measure of the strength (or otherwise) of an economy. This is particularly pertinent in a situation where official data is mistrusted (https://woodfordfunds.com/china-matters/). We try to view growth more holistically and do pay attention to other factors, including those that you mention.
  
  Ultimately, it’s productivity advances that drive real economic growth in the long-term and we are often surprised at how little attention is paid to this in economics and in policy.
  
  Kind regards
  
  Mitch
Daniel Moran 10 Mar 2016 at 5:34 pm

Why are you so comfortable in investing in tobacco companies?
1. Stephen LamacraftModerator 15 Mar 2016 at 12:36 pm
  
  Its purely a function of valuation. The fact that these companies are best able to design and commercialise reduced harm cigarettes or indeed potentially widely adopted E-Cigarette products (with potentially no harm) feeds into this valuation decision.
Roy Lloyd 10 Mar 2016 at 5:36 pm

If you could only buy one share for 2016, what would it be and why?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:18 pm
  
  Hi Roy,
  
  Neil didn’t have time to answer your question in the allotted time but I’m pretty sure he would have said that he couldn’t pick out one specific share, particularly on a 12 month view. Here’s how he answered a similar question on what he does invest in:
  
  “My personal wealth is invested in the Woodford business and in the Woodford funds (including my pension). I have no other investments other than the house that I live in.”
  
  Kind regards
  
  Mitch
Joe Brooks 10 Mar 2016 at 5:42 pm

Bearing in mind the trading conditions since launch do you feel that the Patient Capital Trust has under performed and how long do you feel it will take to produce positive growth figures?
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 4:49 pm
  
  Hi Joe,
  
  I’m afraid we didn’t have time to answer this question during the hour but here’s a response from Neil to a similar question:
  
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.”
  
  Kind regards
  Mitch
Lee Stubbs 10 Mar 2016 at 5:42 pm

Hi Neil,

I’m living of dividends from funds and IT’s but with the funds I struggle to know how much of my dividends to hold back in case of bad dividend years. What I’d really like is an investment trust that mirrors your Equity income funds holdings with modest gearing and your judgement of how much dividends to hold back for lean years. Any chance of this?

What % of my portfolio would you recommend I have in your income fund?

Thanks.
1. Paul FarrowModerator 18 Mar 2016 at 1:55 pm
  
  Hi Lee
  
  There are no plans at the moment but we are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
  
  Regarding your second question, I’m afraid that we are unable to give financial advice.
  
  Paul
DEREK SMITH 10 Mar 2016 at 5:42 pm

Do you think that the share price of Purple Bricks has peaked and are you considering selling ?
1. Harry RaikesModerator 18 Mar 2016 at 1:27 pm
  
  Hi Derek,
  
  Thanks for your question. We continue to have high aspirations for Purplebricks over a long term investment horizon. The company’s hybrid approach is already causing significant disruption to the UK’s traditional estate agency model. We expect this to continue to deliver strong growth in the years ahead.
  
  Kind regards, Harry
Jerry Campbell 10 Mar 2016 at 5:43 pm

Hi Neil, I’d like to hear your latest thoughts on Northwest Biotherapeutics after two recent cash raises at progressively lower prices. Regards, Jerry Campbell
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 4:50 pm
  
  Hi Jerry,
  
  I’m afraid we didn’t have time to answer your question during the hour, but here’s a response from Neil to a similar question:
  
  “We were pleased that the Northwest board appointed an independent committee to investigate the unsubstantiated claims made in the anonymous so-called research reports. We await the product of that investigation. That aside, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.”
  
  Kind regards
  Mitch
Will Smith 10 Mar 2016 at 5:43 pm

Good Afternoon Neil, in your expert opinion which UK shares (held by your funds) are likely to have the highest growth in the next 5+ years! 😛
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:17 pm
  
  Hi Will,
  
  Neil told me once that he learnt very early in his career that his job was to try to ‘optimise’ returns rather than ‘maximise’ returns but it is fair to say that we have a positive view on the long-term return prospects for all holdings in the funds.
  
  Kind regards
  
  Mitch
John Eales 10 Mar 2016 at 5:59 pm

Hi Neil, do you think that the current disappointing investment environment is destined to continue or do you think there is reason to believe that growth will resume in the reasonably near future?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:17 pm
  
  Hi John,
  
  On a medium-term view we think the economic environment will remain very challenging but there are still attractive investment opportunities in equities, one just has to be selective.
  
  Longer-term, economically, there is a light at the end of the tunnel. Ultimately, a recovery in growth must depend on a recovery in productivity, hopefully encouraged by policy that stimulates this through innovation. We are optimistic that this can be achieved in the long-term and our funds are positioned in some of the key industries that should benefit from (and indeed drive) this, such as healthcare, technology and industrials. In the meantime, though, we may have to endure more QE, negative interest rates and increasingly unconventional policy.
  
  Kind regards
  
  Mitch
Richard Sully 10 Mar 2016 at 6:03 pm

Hi Neil. I see the Patient Trust has recently invested in “Industrial Heat”. Do you have any timeframe in mind before you expect this to show a return? Thanks. Richard Sully.
1. Paul FarrowModerator 15 Mar 2016 at 11:06 am
  
  Hi Richard
  We are patient capital investors. Industrial Heat is currently working with numerous scientists and is acquiring both the technology and teams required to maximise the potential of new energy technologies.
  The company recently said that it is willing to invest time and resources to see if this technology might be an area of useful research in its quest to eliminate pollution. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
Ben Horner 10 Mar 2016 at 6:10 pm

Hi Neil, I have invested most of my savings in your UK Equity Fund. I wondered where you invest your money?

Thanks, Ben
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 4:53 pm
  
  Hi Ben,
  
  I’m afraid we didn’t have time to answer this question during the hour but here’s a response from Neil to a similar subject:
  
  “My personal wealth is invested in the Woodford business and in the Woodford funds (including my pension). I have no other investments other than the house that I live in.”
  
  Kind regards
  Mitch
Martin Rowley 10 Mar 2016 at 6:24 pm

Neil, As an investor in your income fund I am hoping to get richer over time. As an already wealthy man, how do you invest your own personal wealth? Martin Rowley
1. Neil WoodfordModerator 14 Mar 2016 at 2:34 pm
  
  Hi Martin, my personal wealth is invested in the Woodford business and in the Woodford funds (including my pension). I have no other investments other than the house that I live in.
  1. Carolyn Ryan 14 Mar 2016 at 3:00 pm
    
    Hi Neil
    Now that’s what you call skin in the game! thanks for your honesty.
Dan Xia 10 Mar 2016 at 6:26 pm

Mr. Woodford,

I am a private investor in Northwest Biotherapeutics (NWBO). Can you take time to answer my only question:

As you have said it has been a bump in the road in your investment in NWBO, which I agreed and considered that normal in investments in a small biotech company with high potential disruptive technology and interests of all parties, particularly those vulture short funds, which are plenty in the case of NWBO. So why you have attached such an importance in the first place to an anonymous cowardly short research report, the Phave V report which is full of accusations with no backing of even a physical human name?

Since then, it seems the only market players have been short funds as evidenced by daily deterioration of share price. If you believe the company still has a reasonable chance to be able to bring one of its DCVax-L and DCVax-D products into market, how long will you wait until you once again participate in the market if you will? Or will you consider unloading your shares, and what is the reason for that?

Thank you,

Dan
1. Paul FarrowModerator 15 Mar 2016 at 11:37 am
  
  Hi Dan
  As we said late last year, if the company is going to move into a sustainable position to attract a broader range of investors, that, in turn will give it a runway to complete its clinical trials, it needed to put allegations of financial improprieties and regulatory failure to rest once and for all.
  
  Accordingly, we engaged with the board on this matter and in a public filing to the US Securities and Exchange Commission in November, we called for the appointment of an independent non-executive director and the convening of a special committee to investigate the allegations. The the company has initiated an investigation, which it suggested would take several months to complete and we are now awaiting its findings. As Neil said yesterday in the live Q&A we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.
John Fox 10 Mar 2016 at 6:27 pm

A number of investments are with Unquoted companies. Would it be possible to advise investors when any such company is about to make shares available (IPO) ? This would provide us with the opportunity to decide whether or not to invest directly at launch.
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:16 pm
  
  Hi John,
  
  Unfortunately, we would be unable to do this since the only promotional document for an IPO of shares is the prospectus – any other documentation would need to be issued on behalf of the board and approved by the sponsor.
  
  Kind regards
  
  Mitch
Michael Isaacs 10 Mar 2016 at 6:34 pm

Hi Neil. I hold both your funds in roughly equal amounts. I am disappointed at the recent significant drop in WPCT due possibly to being overweight in the US Biotechnology sector. Are there not other sectors worth persuing to rebalance this fund a little? Also, I didn’t like the disposal of a rock solid blue chip to raise funds for additional purchases of micro-companies. What about the alternative approach of offering new WPCT units to existing shareholders at or below current book value to raise more capital for investment purposes?
1. Paul FarrowModerator 18 Mar 2016 at 1:54 pm
  
  Hi Michael
  
  Thank you for your question and apologies for the delay in responding.
  
  As Neil said in the Q&A, we continue to believe in the secular growth drivers across the healthcare industry. Not all biotechs will be winners, in the same way that not all pharma stocks will be. However, the companies we have selected in these sectors, we believe, will deliver long-term value for investors. We will follow up with a more in-depth article on this subject on the blog, focusing on why we like the sector in general and the specific attractions of the companies we’ve invested in.
  
  Regarding additional capital raising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon. The trust’s maiden annual results are due out imminently and will contain a comprehensive overview of performance to year end. This and our monthly updates provide an ongoing commentary on the trust’s progress.
  
  Thanks
  
  Paul
Martin Rowley 10 Mar 2016 at 6:35 pm

Neil I am surprised to see that you have a holding in Stobart – given that they have had serious governance issues about land deals and other senior management matters in recent times. Does that suggest that the commercial appeal of the company outways the above negative factors? Martin Rowley
1. Stephen LamacraftModerator 17 Mar 2016 at 4:03 pm
  
  Martin,
  
  The honesty and integrity of the management teams running the businesses in which we invest is paramount. If we believed there were serious and inexplicable governance issues then we would not support management, irrespective of the commercial appeal.
  
  Stephen
Ann Spoto 10 Mar 2016 at 6:36 pm

Mr. Woodford, as a globally respected financial figure, would you support stronger US legislation designed to protect small, innovative and disruptive companies (particularly biotech) seeking capitalization, from falling victim to manipulation devised to harm their chances of success and/or to enrich the pockets of manipulators due to nefarious activities?
1. Neil WoodfordModerator 15 Mar 2016 at 2:56 pm
  
  Yes, Ann, that sounds sensible.
  Kind regards
  Neil
Francis Candylaftis 10 Mar 2016 at 6:36 pm

Hi Niel,

What is your view on the political and economic future of the EU?
Thank you,
Francis
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:16 pm
  
  Hi Francis,
  
  We published our thoughts on the likely implications of Brexit on the UK economy here (https://woodfordfunds.com/insight/brexit-economic-implications/) – conclusion, broadly unchanged.
  
  As for Europe, Brexit could be existential for the eurozone project as it is currently constructed. And, whether we choose to remain or to leave, the organisation is fundamentally challenged in a number of ways, not least by the refugee crisis and the widespread and prolonged economic stagnation. We don’t know how all this plays out but our video of Martin Wolf talking to David McWilliams at Kilkenomics is worth watching on this subject: https://woodfordfunds.com/insight/martin-wolf-global-challenges/
  
  Kind regards
  
  Mitch
Martin Rowley 10 Mar 2016 at 6:41 pm

Neil, given the considerable appeal of emerging markets eg Europe, India, the far East and China – would you be interested in using your professional skills within another Investment Trust to identify the allegedly high dividend streams that are forthcoming from these countries? Martin Rowley
1. Paul FarrowModerator 15 Mar 2016 at 3:03 pm
  
  Hi Martin
  
  Thanks for your question. We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and perhaps the right personnel that fit with our vision and culture.
Peter Tasker 10 Mar 2016 at 6:55 pm

I have a number of ISAS maturing in the next 2-5 months, some are cash, some are stocks and shares. In view of the current market uncertainty and volatility would you suggest rolling them all over into cash ISAS until the market has calmed down, possibly until the EU referendum after which one can hopefully consider a more long-term investment strategy?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:37 pm
  
  Hi Peter,
  
  Unfortunately, we cannot offer you advice because we do not have the relevant regulatory permissions to allow us to do so. The answer will depend on many things, including your attitude to risk, your tolerance to losses and your investment horizon. If you are unsure about what to do, we would strongly recommend you seek financial advice.
  
  Kind regards
  
  Mitch
Daran Joshi 10 Mar 2016 at 7:03 pm

Hi, I would like to please ask, what level do you see the FTSE 100 being on Jan 1st 2020? My personal prediction is 7000, shall we see who gets closest!?
1. Neil WoodfordModerator 16 Mar 2016 at 6:15 pm
  
  Hi Daran,
  
  An interesting question and one I am inclined to duck. I don’t spend much time thinking about the index because I am not investing in the index, but in a portfolio of companies which together look very different to that index. I have a much stronger view about how well my portfolio will perform over the period to 2020 but for regulatory reasons I am not permitted to disclose it.
  
  Kind regards
  
  Neil
Graham Peiser 10 Mar 2016 at 7:04 pm

What is going on with Patient Trust and was sufficient homework done on North West?
Graham
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 5:00 pm
  
  Hi Graham,
  
  I’m afraid we didn’t have time to cover your question in the hour but here’s Neil’s response to other questions along similar lines.
  
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.
  
  We were pleased that the Northwest board appointed an independent committee to investigate the unsubstantiated claims made in the anonymous so-called research reports. We await the product of that investigation. That aside, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.”
  
  Kind regards
  Mitch
Oliver McEvoy 10 Mar 2016 at 7:20 pm

Afternoon Neil,

Your patient Capital is set up as an Investment trust, bit your CF Woodford Equity Income as an OEIC –

Any chance you’ll get an Investment Trust version of the CF Woodford Equity Income going please?

Many thanks

Oli
1. Paul FarrowModerator 15 Mar 2016 at 11:36 am
  
  Hi OIiver,
  We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
Andrew Jarvis 10 Mar 2016 at 7:22 pm

Would you advise investing before or after the vote on the EU?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:37 pm
  
  Hi Andrew,
  
  Unfortunately, we cannot answer your questions specifically because we do not have the relevant regulatory permissions to allow us to do give financial advice. The answer will depend on many things, including your attitude to risk, your tolerance to losses and your investment horizon. If you are unsure about what to do, we would strongly recommend you seek financial advice.
  
  You might also be interested in reading the independent report that we commissioned on the subject of the implications of Brexit on the UK economy if you haven’t already done so: https://woodfordfunds.com/insight/brexit-economic-implications/
  
  Kind regards
  
  Mitch
Barry Miller 10 Mar 2016 at 7:30 pm

Mr. Woodford,
In May 2014, just before you started up, it was reported in the Financial Times, that you were desirous of purchasing 30-or-so non-public stocks from your previous employer that you had purchased for the funds that you managed while there. Two specific investments were mentioned, one of them being Xyleco, described as a materials science company. Given the opportunity, do you feel the same about these investments? My particular interest is in Xyleco, but any comment you can make that reflects your evolving view of these markets would be much appreciated. And congratulations on the establishment of your great new funds.
Jonathanparker Parker 10 Mar 2016 at 7:34 pm

Why has the Woodford Patient Capital fund done so badly and how does the management plan to turn the fund around in the future?
1. Mitchell Fraser-JonesAuthor 14 Mar 2016 at 5:01 pm
  
  Hi Jonathan,
  
  Sorry we didn’t get to answer your question during the hour. Here’s what Neil had to say about a similar question.
  
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.”
  
  Kind regards
  Mitch
John Thornley 10 Mar 2016 at 7:35 pm

Hi Neil,
Do you perceive a future risk to the big-hitter income shares you’ve held for so long, as the older demographic will gradually seek the comfort of bonds?
I’ve noted how understandably wary you are of e.g. regulatory risk (shedding several utilities etc) and of uncertain sectors such as banks and also oil (which you had shunned long before Deepwater Horizon). Do you have concerns about
a) the gradual slow but significant global reduction in global tobacco usage (such as IMB, BATS) and increased regulation there – both of which will eventually slow profitability
b) the poor management of pharma (GSK, AZN) which has seen them asleep at the wheel while pipelines run out and their share prices falter
c) the increasingly narrow choice of well-run, reliable income share companies with low debt and healthy future earnings.
So many shocks in recent years – TSCO, RR, CNA, SSE. It seems no sector is safe – how do you manage that increased risk?
Many thanks for all your wisdom over the years,
John T
1. Stephen LamacraftModerator 18 Mar 2016 at 2:00 pm
  
  John,
  
  I don’t factor this risk into account. Stocks that generate good growing cash flows and can reliably return it to shareholders should have a wide appeal to all investors irrespective of their age. There are many ways to invest and many factors that people take into account. For myself, if a high yielding share is fundamentally undervalued and an attractive long-term investment then it may well find itself in the portfolio irrespective of the appetite for that share.
  
  Even if the older demographic do as you suggest and the rating of that stock falls, by that time it may well have returned many multiples of the market cap. When investing it normally pays to keep it simple. As to the specific points: the tobacco companies have faced considerable regulation and volume declines over a period of years and still generate growing cash piles. This is largely a function of pricing power and overall there is still a considerable scope for increases. The US, for example is the third cheapest market for cigarettes globally in terms of minutes worked.
  
  Concerns over the management of pharma companies are dissipating (!!). We believe Pascal, in particular, has done a great job in rejuvenating the pipeline of AstraZeneca.
  
  As to the narrow choice of well-run yielding companies, I disagree. We have the ability to invest globally at Woodford and our focus has always been on total return and we unearth new gems regularly. Sometimes it pays to look beyond the traditional high yielders and look at capital light companies that have large barriers to entry and strong balance sheets and a desire to return all surplus cash to shareholders. They may well be on high PEs but with high cash conversion and stable balance sheets you may find that they return more cash over the next decade than the traditional high yield / low growth stocks.
  
  I agree no sector is safe. To manage this you need to be ever vigilant and constantly learning. Assuming nothing is sacrosanct is probably the best way to manage the risk.
  
  Kind regards
  
  Stephen
Peers Carter 10 Mar 2016 at 7:37 pm

I believe in investing for the long term and am not too worried about the ups and downs so long as Woodford’s baskets carry on generally up . Which your investments always have – thank you very much !

Will you be launching a VCT at any time ? The tax advantages are very good for the long-term investor….

Cheers Peers Carter
1. Paul FarrowModerator 15 Mar 2016 at 11:36 am
  
  Hi Peers
  Thank you for your question. We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
vincent collins 10 Mar 2016 at 7:54 pm

hi neil

I’m a investor in your wpct
I think its the ideal fund for todays and the future economic enviroment
thanks neil for launching it

hmmm
do you think the capital required for the golden triangle and others
will keep increasing over the following decades
so even more great ideas and inventions can keep coming
hence
even more great ideas/companies to choose from
?
and also neil
do you think its possible in the decades to come that british ideas/inventions
will start developing a culture/mood
that encourages people to keep the ideas in the uk
rather than selling abroad that’s been the trend over the last decades
?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 8:52 pm
  
  Hi Vincent,
  
  Thanks for the question. We believe that there continues to be a vast array of untapped potential within the labs and offices of British universities and, as an investor in WPCT, we appreciate you sharing the vision that this potential deserves to be realised and contribute to the long-term development of the UK economy.
  
  It was the lack of capital in this space which lay at the heart of our desire to launch WPCT last year and we hope that by showing how successful the marriage of long-term capital to academic innovation can be, that it could ultimately help to increase the flow of capital into the golden triangle. We also hope this can help to slowly change the mindset of selling amazing intellectual property too early, rather than allowing the full long-term benefits of commercialisation to accrue to UK investors and the British economy as a whole.
  
  Thanks for your support.
  
  Kind regards
  Mitch
Sean Watson 10 Mar 2016 at 7:55 pm

Hi Neil, two questions:

What are the top 3 things you always look for when researching a company?

Also, how do you get a job at Woodford Investments?

Kind Regards
Sean Watson
1. Stephen LamacraftModerator 17 Mar 2016 at 4:01 pm
  
  Sean,
  
  First and foremost I ask myself whether this is a good business or not. Does it have an enduring franchise. Does it have large barriers to entry and pricing power. All very qualitative but if you intend at the outset to never sell the investment, it’s paramount.
  
  On the proviso that we never wish to sell, a key trait is an ability to generate healthy amounts of cash that can be sustainably reinvested at a healthy spread over the cost of capital and hence generate ongoing value. If the returns are high enough to allow healthy cash returns whilst providing strong growth in future earnings then so much the better.
  
  We then assess management and whether they are suitable custodians of the franchise. These attributes all feed into valuation. Valuation is key. If we identify a truly first class sustainably compounding asset which is well-managed then, over the long-term, we are very likely to enjoy a strong absolute return, even if the valuation looks quite full at first glance.
  
  My aim is to identify stocks that can grow to a multiple of their current share price over an extended period. Warranted, this may limit my investment universe but it gets me off the broker merry-go-round.
  
  Kind regards
  
  Stephen
2. Jon AdairModerator 17 Mar 2016 at 4:05 pm
  
  Hi Sean,
  
  You can find our careers page here for more information about vacancies: https://woodfordfunds.com/the-company/careers/
  
  Jon
  1. Sean Watson 17 Mar 2016 at 11:03 pm
    
    Thanks guys. Very sage advice indeed and very much appreciated. This response to my message is the reason why I’m absolutely 100% confident in the Fund. One major issue i personally have when researching a company is how to measure/value the management. Do you use the Bloomberg terminals to aide your research into management? And do you find it possible to accurately measure the managements abilities without personally meeting them?
    
    Regards
    Sean
Ben Ski 10 Mar 2016 at 8:04 pm

A few investors have moaned about the short-term performance of Patient Capital – not me, I think it’s a great area to be invested in.

I wondered, with so many unquoted positions, how do you calculate the NAV of the portfolio. And with the typical Private Equity cycle over 10+ years, how what kind of timescale do you envisage for many of these positions realizing their underlying value? (i.e. how patient do you think investors need to be to invest in these parts of the market?)

Thank you!
1. Richard LockingtonModerator 15 Mar 2016 at 10:46 am
  
  Hi Ben, to value the unquoted portion of the NAV, our unquoted companies undergo reviews on a six-monthly basis. As part of this review it may become apparent that the fundamentals of the company have changed and as such we undertake an external valuation of the company based on its progress. Any change in value is reflected in the NAV as soon as possible after the valuation event.
  
  The timescale is different for each investment and depends on their current stage of development, the industry they operate in and ultimately what is best for the company and its shareholders. We expect all of the companies we invest in to continually develop and have already seen valuation uplifts in a number of our companies as a result of this progress.
john penna 10 Mar 2016 at 8:10 pm

Hi Neil, What do you think of mining shares (gold) in Australia especially with the likely hood of a recession in the US and with more demand for gold they are booming

For me Breedon Agreegates is up 40% in my portfolio a good solid performer as is Imperial Brands.A good choice taken from your folio.I have a super risky 88e thats made me 174% in a few weeks but I tend to use the p/s ratio of less than 1 overall.

I eventually Sold my Circassia shares as they were not performing are you disapointed in their performance?

New river retail seems to be on the downward trend as with many of the cyclical shares.While many have cut their losses you have increased your amount of shares. Why do you think this is a good share.?

Kind Regards
John
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:12 pm
  
  Hi John,
  
  We remain cautious on commodity prices in general and are therefore cautious on mining companies too. As China’s growth slows and as it evolves away from industrial / fixed asset investment towards domestic consumption, the commodity-intensity of that economy is bound to decline. That process is still ongoing and probably has a long way to run. Gold is slightly different of course – it has many fans as a store of value but we haven’t been interested in it as an asset class for the simple reason that it doesn’t generate cash or pay a dividend, nor will it ever, making it very difficult to value.
  
  Well done on Breedon and Imperial Brands. We are not disappointed by the operational performance of Circassia – far from it – but it is fair to say that the market appears to be struggling to value its long-term commercial potential at the moment. With regard to New River Retail, if the fundamentals haven’t changed but the share price has fallen, the logical thing to do is to buy more, isn’t it? It is a well-managed business with a great track record of creating value by improving its second and third tier retail property assets. It continues to generate excellent returns and has the potential to deliver a very attractive income stream to the portfolio as well as long-term capital growth, in our view.
  
  Kind regards
  
  Mitch
Keith Hutchings 10 Mar 2016 at 8:59 pm

I’m just a low level investor Neil. I’ve allocated 60% of my pension pot to Woodford Equity Income fund. Have l made the correct decision. Over the past few months the fund appears to have struggled. I hear rumours of a recession or even a market crash. I know there are no guarantees but can the fund absorb a crash and recover in three to five years. Thank you, Keith Hutchings
1. Neil WoodfordModerator 15 Mar 2016 at 2:55 pm
  
  Hi Keith,
  I’m afraid we can’t offer financial advice and so cannot comment on the structure of your portfolio. We have been very cautious on the outlook for some time but remain very confident in the funds’ return prospects on a 3 to 5 year view.
  Kind regards
  Neil
Paul Davies 10 Mar 2016 at 9:11 pm

I would be very interested to know your views on expectations for UK house prices over the next (a) 5 years, (b) 10 years, and (C) 15 years together with your reasoning.

Could this be a good time to get out of Buy-to-Let and invest in equities instead?
1. Neil WoodfordModerator 15 Mar 2016 at 2:55 pm
  
  Hi Paul,
  Purely on the basis of valuation, I am very cautious on the outlook for UK house prices over any time horizon. That said, UK housing has defied my expectations for a long time and that could continue. Obviously, I can’t offer a view on the timing of such a move out of buy-to-let but I am confident in the long-term outlook for select UK equities, less so for the market as a whole.
  Kind regards
  Neil
Joanna MacDougall 10 Mar 2016 at 9:19 pm

Talk to us a bit about RM2 please – why do you hold such a sizeable equity position and what are the long term prospects like now?
1. Saku SahaModerator 18 Mar 2016 at 8:16 pm
  
  Hi Joanna,
  
  RM2 International has developed a new glass-fibre pallet for the logistics industry. At first glance this may seem a less exciting proposition than other technology businesses we invest in until you understand the opportunity and challenges that exist within the pallet industry; the volume and cost of wood it consumes, the strength and durability of current pallets, the issues with sustainability and hygiene, the ability to monitor and manage a closed pool.
  
  The company is now in early commercialisation with a pallet that can address the major issues for both users of pallets (e.g. FMCG’s) and the logistics providers themselves – it makes sense financially, operationally and environmentally. That has been proven by the early customer validation and contracts. With a first-class management team and board the business is equipped to face the next milestone – execution and significant customer orders.
  
  We hold a significant position because of the potential returns in transitioning to an established commercial business. On a 3-5 yr view even only modest success in customer wins would deliver excellent returns to shareholders. The journey for any early-stage business is never a straight line but the execution risk and our confidence in management team make this a highly attractive risk-reward.
  
  Kind regards
  Saku
Natver Patel 10 Mar 2016 at 9:25 pm

Hi Neil,

what are the key qualities do you look for in a company before making an investment? You appear to diversify significantly with your top investment less than 10% of the total portfolio. is this because your lack of confidence in the long term durability of the business? how do you react to market volatility?

Natver
1. Neil WoodfordModerator 14 Mar 2016 at 2:54 pm
  
  Hi Natver, there is no simple answer to this question. It’s important to remember that good companies can be bad investments and bad companies can be good investments. It all depends on valuation – what’s in the price. There is no simple checklist – what we’re looking for is undervalued assets, even if they might be poorly managed or in unattractive areas of the economy. Regarding volatility, broadly we ignore it (or at least try to) and where we can exploit it.
David Main 10 Mar 2016 at 9:39 pm

Neil
Your previous comments re Brexit seem to be quite neutral – but what is your view on the fact that – If staying in the EU is such a good plan, according to George Osborn, why did he not join the Euro!!
Regards
David Main
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:12 pm
  
  Hi David,
  
  Technically, of course, it wasn’t George Osborne’s decision whether to join the Euro or not but you do raise a valid point. This appears to be yet another example of the ‘insiders’ coalescing around the status quo (https://woodfordfunds.com/insight/europes-inside-story/).
  
  Kind regards
  
  Mitch
Peter Brown 10 Mar 2016 at 9:42 pm

You dumped Rolls Royce in December 2015 and the shares have moved up about 23% since then …. you still happy with the strategy or is this akin to the Warren Buffet Tesco mishap?
1. Neil WoodfordModerator 14 Mar 2016 at 1:52 pm
  
  Peter,
  As with all of our investment decisions, the sale of Rolls-Royce was the product of a 3-5 year investment view. What has happened since we sold neither validates nor invalidates the decision. We will have to wait and see whether our analysis and judgement proves accurate. I would say that the next two years will be the acid test.
  Thanks
  Neil
Geoff Doran 10 Mar 2016 at 9:46 pm

If as is predicted that there will be a fairly large movement of the £ downwards if we Brexit,what would you recommend the best way to moniter this to capitalise on it in terms of system to use and ways of prediction.

Many thx

GW
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:11 pm
  
  Hi Geoff,
  
  You could argue that some of the movement in sterling has already taken place but we would expect further currency volatility if the UK does vote to leave the European Union in June. We already have considerable overseas exposure in the portfolio which would benefit from continued weakness in sterling, both directly in the form of non-UK equities such as Reynolds American, Roche and AbbVie, and in directly through UK businesses that conduct a significant amount of their business internationally. Fortunately, the UK stock market is by no means a reflection of the UK economy. We wrote about this last year here: https://woodfordfunds.com/local-vs-global/
  
  Kind regards
  
  Mitch
Dale Pigott 10 Mar 2016 at 10:25 pm

Hi – how concerned are you of a Clinton win in the forthcoming US Presidential election given the considerable investment you have in the healthcare sector ?
1. steve Badger 15 Mar 2016 at 4:51 am
  
  Excellent question Dale. This is also a major concern of mine, given that I believe Clinton will win.
2. Lucinda CrabtreeModerator 18 Mar 2016 at 8:25 pm
  
  Hi Dale, Steve,
  
  We continue to believe that the healthcare sector will play a key and prominent role in the future. Naturally, we consider the potential scenarios given the 2016 presidential elections, however given the need for breakthrough technologies and clinically meaningful improvements in current therapy regimens across the board, we still see significant opportunity. You may have seen the note that Saku wrote on this issue last year? You can find it here – it’s still relevant and we stand by that view:
  
  https://woodfordfunds.com/rewarding-innovation/
  
  Kind regards
  Lucinda
Benjamin Kavanagh 10 Mar 2016 at 10:29 pm

The Patient Capital Trust contains a lot of technology and health care companies. I expect that potential of these firms is often to be found in their new product lines. How do you go about assessing freedom to operate for these new products so that you may be confident that they are free of third party rights? What search tools, or other support, do you use? Likewise, how do you assess the value of potential patent protection? Many thanks in advance for any insight you can provide. Ben Kavanagh.
1. Richard LockingtonModerator 16 Mar 2016 at 10:10 am
  
  Hi Ben, we undertake intellectual property diligence on companies where appropriate, ensuring to the best of our ability that there are no conflicts with third party rights. This diligence work is typically undertaken by our appointed IP lawyers with assistance from the investee company.
  
  The value of a patent can be concluded upon in a number of different ways, one of the most common is the relief from royalty method whereby you set a royalty rate which would be payable to the holders of the patent to allow you to operate, this cash flow is then discounted and that provides the value for the patent protection.
daniel robertson 10 Mar 2016 at 11:01 pm

Hi Neil, I’m 18 years old and started investing in the markets at the age of 16 and have learned a lot in that period. Initially I outperformed the market but recently have struggled and lagged it. What age were you when you started learning about investing and were you initially successful?
1. Neil WoodfordModerator 14 Mar 2016 at 2:35 pm
  
  Hi Daniel, I first became aware of the stock market shortly after I started working in my early twenties, despite having studied economics at A-Level and at university. My earliest PA investments were not successful and although not good for my bank balance, they taught me a lot about fundamentals, valuation and patience.
michael brennan 10 Mar 2016 at 11:23 pm

Hi Neil,
I have invested in both funds since they started and I am new to investing. Firstly, thank you to everyone there for doing a great job and being open and honest. I for one, although I feel in a minority sometimes with some of the comments, see the potential of the Patient Trust and after the Purplebricks listing on AIM feel enthusiastic about the long term potential.

My question relates to Financials as we’ve 28 holdings in the sector. Does bad press influence your thinking when looking at a sector or do you put that to one side and judge on fundamentals?
Thanks
Michael Brennan
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:11 pm
  
  Hi Michael,
  
  The bad press for the financials sector has been primarily focused on the banks, where the funds exposure is minimal. We are invested in new start-up challenger bank Atom Bank but remain cautious on the investment attractions of the existing mainstream banks.
  
  Instead, our financials exposure is mainly in areas such as life insurance (Legal & General), alternative lending (Provident Financial) and non-life insurance (Hiscox, Beazley, Lancashire). Our intellectual property commercialisation holdings including, Allied Minds, Imperial Innovations and IP Group are also classed as financials companies, even though the businesses they invest in and nurture operate in very different parts of the economy.
  
  Overall, our financials exposure is quite an eclectic mix of very different businesses which are united by a consistent characteristic – undervaluation and our conviction in their ability to deliver attractive long-term returns.
  
  Thanks for your support.
  
  Kind regards
  
  Mitch
OZREN LJEVAR 10 Mar 2016 at 11:23 pm

The Fund price is going down but the dividends percentage as well. My math is not good but it isn’t quite logical,is it?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:04 am
  
  Hi Ozren,
  
  No that isn’t logical. Yield should rise as price falls, unless of course the income from that security falls as well. That hasn’t been the case for the fund.
  
  I’m not sure where your looking at the yield but it is quoted in the fund facts area of our website (https://woodfordfunds.com/our-funds/weif/fund-facts/). Here we take the total of the last 4 quarterly income payments per share and divide that by the current price to arrive at a historic yield of 3.5%.
  As we only display the yield to one decimal place it is plausible that the price could fall (modestly) without the yield rising but it should not be the case that the yield falls when the price falls. That would only be possible if income also fell which has not been the case over the last 12 months, nor do we expect it to become the case – we are confident that income from the fund will grow modestly this year, in spite of the widespread pressure on dividends elsewhere in the market.
  
  Kind regards
  
  Mitch
nigel morley 10 Mar 2016 at 11:52 pm

Did you watch the big short
What did you think about it?
Is this why you don’t like banks
What if anything do you see in the investment possibilities of water ? MB latest interest
Thank you
Nigel Morley
1. Neil WoodfordModerator 14 Mar 2016 at 3:17 pm
  
  Hi Nigel – I haven’t seen it or read the book but I would like to, it’s on my list.
  Kind regards
  Neil
Jonathan Dobson 11 Mar 2016 at 12:30 am

I believe that you have taken a substantial stake in PAY LN. Why?
1. Stephen LamacraftModerator 18 Mar 2016 at 2:20 pm
  
  We believe PayPoint is an undervalued asset with strong prospects for growth and capital returns.
  
  Stephen
Steve Yuan 11 Mar 2016 at 1:42 am

Hi Neil,

I am wondering if you could comment on:
1. How do you spend your day?
2. Your research process and how do you find new ideas?
3. Regarding holdings, it is of obviously defensive high quality names, which is the right approach for this expensive market (you might think they are highly predicable and sustainable dividend growers, which is also true). If we enter into a bear market (at least +20% correction), would you shift your portfolio to risky part of the world or hold the same names at the risk of under performing near term in a risk rally? I think this is a transition which needs one to be either flexible or more discipline focused.
4. Of all financial names, why choose Legal & General instead of Standard Life, Prudential, Admiral, or banks?
Thanks and look forward to it.
1. Stephen LamacraftModerator 18 Mar 2016 at 8:08 pm
  
  Hi Steve,
  
  Thanks for the question. A typical day is spent meeting companies, reading research, talking to brokers and analysts and managing the cash flows of the funds. There should also be a bit of thinking time squeezed in there somewhere!
  
  New ideas are either internally generated (simply being curious about a stock) or through previous knowledge of that company and a recognition that the share price has moved, or through reading research notes and talking to brokers/analysts.
  
  Regarding switching the portfolio around following a large correction this would be unlikely. We would rather undergo a period of weak relative performance than forgo the opportunity of making outsized risk-adjusted returns over the medium-to-long-term. Our aim isn’t to outperform the index per se as nobody knows what the index will do. Our aim is to provide high single-digit absolute returns per annum on average on a 3 to 5 year view. By doing this it is highly likely that outperformance of the benchmark will take care of itself. As some say, “you cant eat relative performance”!
  
  Our aim is also not to capture the odd 20% return here and there and then switch into another 20% opportunity. Far better to pick stocks that could return a far greater return (a multiple of their current share price) albeit over an extended period.
  
  In terms of the financial names, there are merits in all the names you mention and they are all frequently assessed. At present, however, our view is that Legal & General is best positioned to provide sustainable growth in an already very high dividend over a sustained period of time and as such is most profoundly undervalued.
  
  Kind regards
  Stephen
Wales Cheung 11 Mar 2016 at 1:59 am

Dear Neil,

Would you agree we are in the middle of a perfect storm with strong headwinds?
Low inflation (and even deflation) placing pressure on economies and physical assets. To counter, Central Banks’ printing machines on overdrive, in turn driving down bond yield whilst not having the aspired effect on inflation. Throw in the uncertain commodities market and slowdown in China; further denting confidence. Where do you think the drivers to kickstart growth will come from? And which sectors will especially benefit from them? Hopefully the answer will not involve more negative interest rate or more QE.

Regards,
Wales
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:03 am
  
  Hi Wales,
  
  Yes, we would agree with that prognosis. The points you make are all valid and are all inter-linked. The video clip of Martin Wolf talking to David McWilliams at Kilkenomics is well worth watching (https://woodfordfunds.com/insight/martin-wolf-global-challenges/) as a guide to how we got into this mess and indeed how we may get out.
  
  Ultimately, a recovery in growth must depend on a recovery in productivity, hopefully encouraged by policy that stimulates this through innovation. We are optimistic that this can be achieved in the long-term and our funds are positioned in some of the key industries that should benefit from (and indeed drive) this, such as healthcare, technology and industrials. In the meantime, though, we may have to endure more QE, negative interest rates and increasingly unconventional policy.
  
  Kind regards
  
  Mitch
  1. Wales Cheung 16 Mar 2016 at 10:17 pm
    
    Dear Mitch,
    Thank you very much for the response. I do share Martin Wolf’s opinion on the possible tools to tackle this. I do advocate investment in infrastructure; injecting capital into the economy whilst reaping a long term benefit the projects ultimately bring.
    Whilst the principle behind Governments creating extra capital during downturns to drive economic growth, and calling back the capital when the economy stabilises, is a valid one. I can’t help but feel concerned seeing i) Governments in regular prolonged deficit creating this extra capital from nowhere (on what basis?), ii) investors expecting this to happen, akin to drug addicts waiting and expecting a regular fix, reinforcing the need for it. Let’s hope advances in the industries you mentioned will take us out of this mire. Excitingly uncertain times I must say!
    Regards,
    Wales
Robert Dwek 11 Mar 2016 at 2:22 am

I have growing concerns about my investment in WPCT and its potential undermining of Neil’s reputation (akin to when when Anthony Bolton lost some of his lustre after launching his China fund):

The word “patient” has been made a bit of a nonsense by all of this: firstly by the investors who were extremely impatient to give the IT such a premium to NAV. But, more importantly, why were the fund managers so incredibly impatient in investing all that money ?

Neil said at the time that certain biotech stocks were at “rock bottom” prices but the fund’s performance has been hit numerous times by the air coming out of many of its biotech holdings – none more so than Northwest Biotherapeutics, into which you poured £120m (?) at much higher prices but apparently refused to be part of its latest fund raising at the current bombed out price. One can only conclude that you have had a dramatic change of heart about NWBO.

Now WPCT wants to raise more funds itself for other “great opportunities” but I agree with people who say this is clearly because you were far too impatient in investing (some would say blowing) much of the original capital.

Going into biotech on such a large scale, no matter how much previous experience the fund managers claim to have had in this area, was always going to be a very dangerous path, even without the prospect of Hilary Clinton over-regulating the US healthcare industry.

I would like some reassurance from you that the concerns expressed above are overblown.

Thank you.
1. Neil WoodfordModerator 16 Mar 2016 at 6:09 pm
  
  Hi Robert,
  
  The pace at which we have invested the money in no way reflects impatience – it was a consequence of the abundance of high quality, profoundly undervalued, exciting young businesses that have been presented to us in the last 18 months. Some of these opportunities had been under comprehensive due-diligence for a long period prior to the trust’s launch. Raising a larger pool of assets has allowed us to take larger stakes in some of the companies with the greatest long-term potential than we would otherwise have been able to. Furthermore, it also allowed us to tap into a deeper and richer seam of early-stage businesses than we previously realised existed.
  
  The term ‘patient’ applies as much to our portfolio construction process, therefore, as it does to our attitude towards the businesses we have backed as they evolve and slowly realise their full long-term commercial potential. There’s not much we can do to ensure that this ‘patience’ is shared by the trust’s shareholders other than to remain consistent in our explanation of the investment opportunity and in the application of our long-term, fundamentals-based investment approach.
  
  Regarding our biotech exposure, we continue to believe in the secular growth drivers across the healthcare industry. Not all biotechs will be winners, in the same way that not all pharma stocks will be. However, the companies we have selected in these sectors, we believe, will deliver long-term value for investors. We are intending to follow up with a more in-depth article on this subject on the blog in the near future, focusing on why we like the sector in general and the specific attractions of the companies we’ve invested in. As for the future regulation of the US healthcare industry, we wrote about this last year here (https://woodfordfunds.com/rewarding-innovation/) and stand by the conclusion that real healthcare innovation will continue to be appropriately rewarded.
  
  Finally, on the subject of a future fundraising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon.
  
  Regards
  
  Neil
Hywel Phillips 11 Mar 2016 at 5:11 am

If you were a novice investor starting with £100k to invest, where would you allocate the money?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:36 pm
  
  Hi Hywel,
  
  Unfortunately, we cannot offer you advice because we do not have the relevant regulatory permissions to allow us to do so. The answer will depend on, amongst other things, your attitude to risk, your tolerance to losses and your investment horizon. If you are unsure about what to do, we would strongly recommend you seek financial advice.
  
  Kind regards
  
  Mitch
Ken Bywater 11 Mar 2016 at 5:36 am

How do you evaluate management? How often do you speak to the directors of each holding or do you get your team to do most/all/none of that? What questions are typically asked? What are typical ‘red flags’ that are discovered during these meetings?
1. Neil WoodfordModerator 14 Mar 2016 at 3:04 pm
  
  Hi Ken, engagement with management is an incredibly important aspect of investment management. I spend a lot of time in meetings with the companies that we own and indeed with some that we don’t. We would normally meet the management of companies that we are invested in at least twice a year, sometimes more frequently than that. We actively engage with management teams, typically focusing on long-term strategy, rather than the latest quarterly numbers. Furthermore, when things go wrong, our general approach is to favour engagement over sale. In summary, we have a very activist approach.
Edwin Moody 11 Mar 2016 at 6:59 am

Hi Neil,

Do you think you made a big mistake in selling Rolls Royce seemingly at the bottom? After issuing a blog entitled “Roll with it” and sticking with the stock all the way down, it is disappointing to see the substantial recovery in share price, especially cosidering the company restructure and full pipeline of orders. Thank you.

Edwin Moody
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:02 am
  
  Hi Edwin,
  
  Neil responded to another question on Rolls-Royce earlier this week with this:
  
  “As with all of our investment decisions, the sale of Rolls-Royce was the product of a 3-5 year investment view. What has happened since we sold neither validates nor invalidates the decision. We will have to wait and see whether our analysis and judgement proves accurate. I would say that the next two years will be the acid test.”
  
  Kind regards
  
  Mitch
anthony alogba 11 Mar 2016 at 7:55 am

Hi Neil i currently have 30 percent of my sipp portfolio in cash as I am relatively new to investing and am concerned about the current economic headwinds. What is your view about holding cash at present?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:28 pm
  
  Hi Anthony,
  
  Unfortunately, we cannot offer you advice because we do not have the relevant regulatory permissions to allow us to do so. The answer will depend on, amongst other things, your attitude to risk, your tolerance to losses and your investment horizon. If you are unsure about what to do, we would strongly recommend you seek financial advice.
  
  We share your concern about the economic headwinds and they have been influencing our investment strategy for some time. We are nevertheless fully invested because we believe we have populated the portfolios with shares that can deliver attractively positive long-term returns, in spite of those headwinds. If the alternative is cash, the bar is very low and easily jumped, particularly when you consider the dividend yields available on many of the high quality, dependable growth stocks that we are invested in.
  
  Kind regards
  
  Mitch
Malcolm Lidierth 11 Mar 2016 at 8:22 am

In his recent article available on your website (https://woodfordfunds.com/insight/fighting-the-last-war/) David McBride asks:

“It is often said that generals are brilliant at fighting the last war – could we say the same of central bankers?”.

Well, you cannot choose your central bankers, but you can choose your fund managers – and, despite the customary caveats, managers tend to be judged on their performance in past wars.

Present economic/market conditions seem to be unique. What should one look for in a fund/fund’s management in present circumstances?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:01 am
  
  Hi Malcolm,
  
  Short-haired, stockily built, ex-rugby players in their mid-fifties?
  
  Joking aside, we’re perhaps not best placed to answer this question but, in our view, a good starting place would be to look for fund managers that acknowledge and try to understand the challenging economic conditions that we currently face, rather than those that are in denial of them.
  
  Kind regards
  
  Mitch
Mario Angeli 11 Mar 2016 at 8:22 am

Hello Neil,
I hope this doesn’t sound foolish but would you ever consider investing in a depressed market like Greece. If you saw a well run company, that had an international presence, plenty of cash in the bank, paid a rising dividend but was Greek, would you invest? Would the macro economic environment put you off?
Thank you,
Mario Angeli
1. Stephen LamacraftModerator 18 Mar 2016 at 1:59 pm
  
  Hi Mario,
  
  We would indeed invest in such a company. Our macro view is one input into the valuation process. We would invest in a cyclical company (let alone Greek) if we felt that sufficiently conservative assumptions were embedded in the valuation of its shares. It may be unfashionable at the time but over a longer-term investment horizon, the fundamental undervaluation of that company should correct. Many of the best long-term investment decisions are born from this contrarian perspective.
  
  Kind regards
  
  Stephen
Tim Davies 11 Mar 2016 at 8:29 am

Good morning Neil. Everyone seems to be preoccupied with the effect of Brexit on the UK economy, however it seems to me that the bigger question is what will be the effect on European economies. Would Brexit encourage other members to leave the EU? How would the Euro react. Could we see a UK/European/Global economic meltdown or would everything settle down as normal after a period of volatility?

Incidentally, I am still Patient!!

Regards, Tim Davies
1. Neil WoodfordModerator 14 Mar 2016 at 2:57 pm
  
  You make a very valid point here. The debate in the UK has been very parochial hitherto. Brexit could indeed be existential for the eurozone project as it is currently constructed. Not least because the refugee crisis and economic stagnation are already fundamentally stressing the organisation. The elections in Germany over the weekend are ample evidence of this. If we did vote to leave, there would be a period of economic uncertainty, coincident with currency volatility for the UK and the eurozone. I don’t think this would result in an economic meltdown, however.
Edward Thomas 11 Mar 2016 at 9:11 am

Hi Neil
It seems the short to medium term market downside of an EU exit is very high whilst the short term upside of a vote to stay in is very limited. Purely from an index perspective, it seems entirely possible/likely the FTSE could fall to 5,000 and below in the days leading up to the vote possibly getting worse for a while with an out vote but likely only to recover back up to around 6,500 in the event of a stay in vote. I can’t see anything but logic for investors considering at least cashing in 50% of their shares now whilst the FTSE is pushing towards 6,500 and reinvesting soon after the vote whatever happens. Is there something wrong with my logic?
Eddie
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:01 am
  
  Hi Edward,
  
  Your logic appears sound at first glance but it is based on a very short time horizon. We focus on the long-term because we find it extremely difficult to predict what markets will do over shorter time periods. There is an old investment saying, “It’s time in the market, not timing the market, that counts”.
  
  Kind regards
  
  Mitch
Andrew Robertson 11 Mar 2016 at 9:16 am

What is your view on Targeted Absolute Return funds and other multi asset investment strategies?
Ian McNeil 11 Mar 2016 at 9:19 am

Hello Neil, There was a lot of comment in the press about Northwest Biotherapeutics recently and the implication was that a severe write down was required . Can you confirm the current status and prognosis of the investment , and was its write down largely responsible for the fall in the price of the Patient Trust to 87p? Thank you. Ian McNeil
1. Paul FarrowModerator 15 Mar 2016 at 10:32 am
  
  Hi Ian
  We were attracted to Northwest Biotherapeutics by its technology, which looks to harness the power of the body’s immune system to fight cancer. Since we first invested, however, allegations of financial improprieties and regulatory failure have been published by at least one anonymous source. We have engaged with the board on this matter and in a public filling to the US Securities and Exchange Commission, we called for the appointment of an independent non-executive director and the convening of a special committee to investigate the allegations. Accordingly, the company has initiated an investigation and we await its findings. Regarding performance, Northwest has been the largest negative contributor to performance of the trust since it was launched last year.
David Wardell 11 Mar 2016 at 9:20 am

Hi Neil,
I have been an investor of both of your funds since the outset, I am very
pleased with the performance of the equity fund and totally
understand the need for perseverance in the capital trust fund, I would be
grateful for your thoughts on starting in the future a fund specific to Asia or nearer to home Europe.
Keep up the good work
Best Regards
Dave Wardell
1. Paul FarrowModerator 15 Mar 2016 at 11:05 am
  
  Hi David
  We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
Adam Wilkins 11 Mar 2016 at 9:40 am

The UK biotech sector is littered with the corpses of many failed companies – Ark, Alizyme, Ardarna, Cenes, Scotia, British Biotech, Phytopharm, Cantab, Regen, etc and far fewer winners. What makes you think that your Biotech picks will beat the odds and be amongst the successes?

Thanks.
1. Saku SahaModerator 18 Mar 2016 at 9:06 pm
  
  Hi Adam,
  
  I don’t think there is a magic bullet here. Biotechs will always face the risk of clinical trial failures. But if you widen your criteria to all UK innovation over that same period, the biotech story becomes much more positive. It is just that success has not been seen through the creation of a larger number of UK-listed success stories.
  
  We can’t eliminate the risks but we certainly can mitigate them and avoid ones that don’t need to occur. Appropriate financing, for example, is important and patient capital is at the heart of this. We have a great starting ingredient of world-class research coming out of British labs. If you combine that with appropriate capital that can follow-on to support a business through success, you can attract the best people.
  
  Kind regards
  Saku
John Warren 11 Mar 2016 at 9:57 am

Hi Neil

With regard to the proposed raising of additional capital for WPCT, whilst recognising that there are probably regulatory constraints on what if anything you can add at this time if it is going ahead, are you able to give an update on this. Also on the same subject but in a more general vein, could you expand a little on which areas you are finding potential opportunities to deploy this additional capital should it be raised, i.e. more biotech, fintech or other areas. Thank you.
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 8:42 pm
  
  Hi John,
  
  Since launching WPCT, the opportunity set we have seen has been deeper and richer than we envisioned, justifying our initial belief that the supply of patient capital was painfully lacking. We continue to see opportunities in a number of sectors including healthcare, industrials, fintech and technology.
  
  Regarding the additional capital raising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon.
  
  Kind regards
  Mitch
Guy Shepherd 11 Mar 2016 at 9:58 am

Good morning Neil and the team at WIM,
On 1st March, there was a report in the press about the possibility of your equity income fund falling out of the sector because its’ 1-year yield fell below the sector’s 3-year target. However, as we all know, the objectives of the fund are long term capital growth with a target income return of 4%. Please can you give your opinions of how the Investment Association measures investment funds and the prospect of your fund falling outside the sector. A few years ago, the IP High Income fund was removed from the sector – this sort of action by the IA does not help advisers complete robust research into quality funds within the equity income sector. Many thanks, Guy Shepherd.
1. Neil WoodfordModerator 14 Mar 2016 at 3:09 pm
  
  Good point – I read the article and I agree with it.
Ray Martin 11 Mar 2016 at 10:18 am

What is Neil’s assessment of the potential risks, including reputational, in further expansion of the Patient Capital Trust and what are the mitigating factors?
1. Paul FarrowModerator 16 Mar 2016 at 10:11 am
  
  Hi Ray
  
  Many thanks for your question regarding the fundraising. No decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon.
Alan Plunkett 11 Mar 2016 at 12:03 pm

Thank you Neil and team for the q&a opportunity.
Re WPCT, how well does the current valuation level of the fund [as opposed to market price] fit with your inside view of company prospects within the fund? Perhaps one or two examples of how such prospects could play out and how this would impact valuation over the next few years?
Alan Plunkett
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:42 pm
  
  Hi Alan,
  
  This is a question that we cannot answer with specific details for regulatory reasons. Suffice to say, however, that we have been very pleased with the underlying progress of most of the businesses in which we have invested in the trust. Many of them have exceeded our initial expectations. This progress isn’t fully reflected in valuations, in our view, nor is future long-term potential.
  
  Kind regards
  
  Mitch
Geoff Edwards 11 Mar 2016 at 12:04 pm

Hello Neil,
Do you see the increase in Peer to Peer investing (and the better interest rates achievable there, especially with the advent of the new IFISAs from April 2016) as a threat to equity investment? Do you think UK private investors’ attitude to risk has changed in the past decade and do you expect it to change in the medium term?
Thanks
1. Harry RaikesModerator 18 Mar 2016 at 1:26 pm
  
  Hi Geoff,
  
  We continue to monitor the P2P market and its broader implications. It is still too early to conclude as to what effect the growth in alternative financing options, including P2P and equity crowdfunding, might have on SME financing and the attitude of investors in the long term.
  
  Kind regards, Harry
Lucy Na 11 Mar 2016 at 12:22 pm

Hi Neil. Value stock are trading at unprecedented discounts relative to growth stocks which were over-performing for the last 6 years. Last month finally this trend has changed and value over-performed growth. Do you think this will continue throughout the year? Thanks, Lucy Kupczak
1. Stephen LamacraftModerator 18 Mar 2016 at 1:59 pm
  
  Hi Lucy,
  
  I think you have to be careful when you think of growth and value. I know of a number of companies that are on high PEs but have excellent cash conversions and strong balance sheets. These companies are likely to start returning at least 4% of their market cap as cash whilst growing the cash returns at a strong and sustainable rate. Conversely, lowly-rated value type stocks may have poor balance sheets poor cash conversions and utilise scrip dividends, further diluting an already poor real cash flow stream. They may even have more regulatory risk and lower barriers to entry. Even if the so-called ‘growth’ companies growth mitigates (beyond that priced in) and it gets de-rated, it may still deliver a far higher percentage of its current market cap in cash to its shareholders over the next decade. Some ‘growth’ stocks will do well and some will come crashing to earth as the growth never materialises. Conversely, some ‘value’ companies may turn out to be dreaded ‘value traps’.
  
  In conclusion, therefore, I’m not sure what class of shares will do well and nor do we invest on such a basis. Each stock should be considered on its own merits.
  
  Kind regards
  
  Stephen
David Allanson 11 Mar 2016 at 12:26 pm

The world is changing. Previously held convictions are no longer working. Everybody has been trained to think in the same way. Most equity fund managers are bottom up stock pickers. How can anybody be successful without a top down view these days?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 10:00 am
  
  Hi David,
  
  We don’t think they can. Some investors ignore the macro-economy, complaining that it’s too difficult! Perhaps in a more benign economic environment, you can get away without it but in the sort of conditions we currently face (and indeed have faced for years now), it is absolutely critical. Stock picking is important too, obviously, but in our view, it needs to go hand-in-hand with a well-founded assessment of the macro-economic outlook which affects all businesses to some degree or other.
  
  Kind regards
  
  Mitch
John Warren 11 Mar 2016 at 1:16 pm

Hi Neil

Do you have any thoughts on appointing a co manager to the Equity Income fund in due course. I ask because 3 of the 5 Equity Income (HL Wealth 150+) funds I am invested in have a dual manager structure, which gives me a certain amount of confidence in the longer term continuity of the investment style and process. Thank you
1. Paul FarrowModerator 15 Mar 2016 at 11:36 am
  
  Hi John
  Many thanks for your question. Neil has a dedicated investment team that already includes three fund managers, Stephen Lamacraft, Paul Lamacraft and Saku Saha, whose sole responsibilities are to provide him with the analytical and research support he needs to manage portfolios.
Michael Buckley 11 Mar 2016 at 2:48 pm

Hi Neil
Can you give me a brief insight into your fundamental approach to investing? What are the main things you look at when selecting stocks?
Thanks
Mike
1. Stephen LamacraftModerator 15 Mar 2016 at 12:36 pm
  
  Hi Michael, valuation is our key metric when assessing stocks. To give valuation context we look at the quality of the business (barriers to entry/pricing power etc.), the financials (level of debt, cash generation, return on incremental capital etc.) and quality of management.
peter schofield 11 Mar 2016 at 3:05 pm

Neil
Will you be voting to stay or leave the european union.
1. Paul FarrowModerator 15 Mar 2016 at 11:35 am
  
  Hi Peter
  From time to time, Neil publicly expresses views on the political landscape but this will always be in relation to its impact on economic affairs. Neil (and the firm) doesn’t believe there is a great deal of objective, independent research on the economic impact of Britain, either staying in the EU or coming out. That’s why we commissioned Capital Economics, to write a report for us looking at the likely impact of Brexit on the UK, purely from the perspective of economics.
  
  When it comes to party politics, Neil – and indeed the business that bears his name – remains an observer and not a participant. I’m hope you understand why, on this occasion, we cannot answer your question directly.
John Brindle 11 Mar 2016 at 3:21 pm

I’m far from alone in liking your products so far, Neil; any prospects for an Equity Income Investment Trust and a MultiAsset fund?
1. Paul FarrowModerator 18 Mar 2016 at 1:53 pm
  
  Hi John
  
  We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
  
  Thanks
  
  Paul
John Hearnshaw 11 Mar 2016 at 4:16 pm

Hi Neil
How big is too big? With a fund size of more than £8bn, the Woodford Equity Income Fund has come a long way from a zero starting point in less than 2 years. You must be very pleased at the confidence which investors have shown in you and your team. Nevertheless very large funds are less agile than smaller ones and make it harder for you to stick to your original investment strategy.

Will there come a point at which you might feel the need to soft close the fund in order to maintain its strategic direction and, if so, where might that point lie? £10bn? £15bn? Or more?

Regards, John Hearnshaw
1. Stephen LamacraftModerator 18 Mar 2016 at 1:58 pm
  
  Hi John,
  
  Neil has history of running funds many multiples the size of the current fund and even then he still backed himself to outperform. We are not short-term traders, looking to be agile, but long-term owners of assets and, if required, can patiently build positions over a prolonged period of time.
  
  There is no magic number but we would dispute the assertion that a large fund makes it harder to stick to our original strategy. It just makes it even more important that we have strong conviction in every position in the portfolio and that we would be happy holding it for a very long period of time.
  
  Kind regards
  
  Stephen
Richard Saldanha 11 Mar 2016 at 4:24 pm

Whilst I thought the Capital Economics report that you commissioned was very well balanced, I cannot believe a split from the EU can be good for the UK over time. We’ve enjoyed massive prosperity (although somewhat concentrated in Southern Britain) for over two decades, which I believe is in no small part attributable to our membership of the EU. The one valid argument for exiting (in my opinion) is if it’s already the beginning of the end for the European project. (I note potential Dutch and Czech referendums on EU membership.) Our exit may of course be the catalyst for the EU’s demise. I’d be very interested in your general thoughts here.
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:59 am
  
  Hi Richard,
  
  Great question – I’m afraid we didn’t find time to answer it in the allotted time but Neil did respond to something similar. Here is his reply which I hope you find of interest.
  
  “You make a very valid point here. The debate in the UK has been very parochial hitherto. Brexit could indeed be existential for the eurozone project as it is currently constructed. Not least because the refugee crisis and economic stagnation are already fundamentally stressing the organisation. The elections in Germany over the weekend are ample evidence of this. If we did vote to leave, there would be a period of economic uncertainty, coincident with currency volatility for the UK and the eurozone. I don’t think this would result in an economic meltdown, however.”
  
  Kind regards
  
  Mitch
  1. Richard Saldanha 21 Mar 2016 at 10:31 am
    
    Hi Mitch,
    Thanks for the reply. I’d say the debate has been horribly parochial thus far. I agree that I don’t see economic Armageddon if we did vote to leave the EU. However, I think the UK’s growth potential will be lowered (over time), although short-term currency weakness is probably beneficial now; there is a dangerous minefield for us to negotiate in terms of new and/or revised trade agreements; and our general influence on a world stage will be reduced. I guess we watch and wait.
    Thank you Woodford IM generally for a balanced discussion about Brexit.
    Richard
robert phillips 11 Mar 2016 at 4:58 pm

Hello Neil
Myself and my family have investments in the income fund and patient trust. As indicated at the outset, the patient trust is very much a long term investment, however with the challenges associated with the high profile usa investment, and the reporting that you have declined to invest further, can you comment on the present state of the fund and the impact on the fund that this entity has.In a very challenging market,how do you envisage things panning out for the fund in the next few years.
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:58 am
  
  Hi Robert,
  
  Thanks for your support.
  
  I think you’re probably referring to Northwest Biotherapeutics, a company we were attracted to by its technology, which looks to harness the power of the body’s immune system to fight cancer. Since we first invested, however, allegations of financial improprieties and regulatory failure have been published by at least one anonymous source. We have engaged with the board on this matter and in a public filling to the US Securities and Exchange Commission, we called for the appointment of an independent non-executive director and the convening of a special committee to investigate the allegations. Accordingly, the company has initiated an investigation and we await its findings. Regarding performance, Northwest has been the largest negative contributor to performance of the trust since it was launched last year.
  
  Kind regards
  
  Mitch
jonathan jackson 11 Mar 2016 at 5:33 pm

Tobacco stocks remain an important part of the portfolio. For now, price increases and strong free cash flow are positive drivers, but does their come a point when falling volumes bring this to an end.
1. Stephen LamacraftModerator 18 Mar 2016 at 1:44 pm
  
  Hi Jonathan,
  
  I agree that price rises can’t go on indefinitely without having an increasingly negative impact on volumes but in many markets that is still a long way away. The US, for example, is currently the third cheapest country in which to buy cigarettes in terms of minutes worked and only recently have companies started pushing pricing here as opposed to fretting over market share. A final point to note is the portfolio make-up of the large tobacco companies should switch gradually to e-cigarettes (and other reduced harm alternatives) which would provide cash flows long after the last traditional cigarette is smoked.
  
  Stephen
Shashank Garg 11 Mar 2016 at 5:52 pm

Do you think OIl and mining sectors are bottomed out ? Is it worth to take risk with companies like COP and 88E?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 9:14 pm
  
  Hi Shashank,
  
  We are not convinced. It’s not at all clear where the underlying price of commodities will end up and there are some strong arguments to suggest that on a medium-term view prices may have fallen too far. However, from a demand perspective the risks seem to be mounting and, as cost curves shift down to catch up with the price declines, the supply response is far from certain. We remain cautious on the long-term outlook for such sectors.
  
  As for the risks involved with those sorts of companies, that’s for you to judge, not us. We couldn’t possibly comment… (if you’re at all unsure, please do seek financial advice).
  
  Kind regards
  Mitch
Grant Cowley 11 Mar 2016 at 7:09 pm

Hi Neil, you have done extremely well in the past by investing in companies with strong cash flow characteristics and potential for dividend growth often in the “value” end of the style spectrum.
Therefore I would appreciate understanding how you approach investing in biotechnology in the Patient Capital Trust as I would have thought this sector is often characterised by being cash needy and ridden with momentum investors.
1. Lucinda CrabtreeModerator 18 Mar 2016 at 8:22 pm
  
  Hi Grant,
  
  There is clearly demand for better healthcare across many different therapy areas and at the academic level we see significant advancement in our understanding of such diseases. With appropriate investment at an earlier stage we see significant opportunity for value creation and with it, improved medicines for patients.
  
  Kind regards
  Lucinda
Joseph Rouski 11 Mar 2016 at 8:07 pm

Is it safe to have money in bank accounts in the present climate with all the talk about an other banking crisis looming
Thanks Joe
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:56 am
  
  Hi Joseph,
  
  I’m afraid we didn’t have time to reply to your question in the allotted time but we are keen to respond to those who participated. It’s a good question – we would suggest the answer is “yes, probably” but don’t expect much in the way of interest for some time to come!
  
  Kind regards
  
  Mitch
June Bertram 11 Mar 2016 at 9:16 pm

Do you think we will have abolition of cash in the UK and if we do how will equities fare?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:55 am
  
  Hi June,
  
  I’m afraid we didn’t have time to answer your question in the allotted time but we are keen to get a response out to those who participated in the session. We’re not anticipating the abolition of the cash in the UK any time soon but it has of course been discussed by some of our more open-minded central bankers already. If we do see it, it is likely to be accompanied by a negative interest rate environment in response to even lower growth and more deflation – neither of these would be good for equities.
  
  Kind regards
  
  Mitch
Robert Bartholomew 11 Mar 2016 at 11:02 pm

Hello Neil
Great fan of your UK Equity Fund but was mystified by the .49 drop on Friday 11th, not particularly because of the FTSE 100 being up over 100 points, but due to the fact that I have kept a watchlist of the whole portfolio and most of them were on a 1 to 2% gain on the 11th March at the end of the trading day.
I am sure the process for determining the price on any particular day is more complex than it seems.
Thanks
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:54 am
  
  Hi Robert,
  
  The main thing to bear in mind on daily pricing is that the fund prices at midday, so the price change will reflect the movement in the share prices of underlying holdings from midday the previous day. In volatile markets, this can lead to quite substantial and surprising differences in the performance of the fund compared to the open-to-close returns that are quoted for the broader indices.
  
  It’s also worth pointing out that this is a long-term investment strategy which is best measured over years not days.
  
  Kind regards
  
  Mitch
Philip Gosling 12 Mar 2016 at 5:18 am

There has been a lot of comment on the disastrous investment in America. What went wrong and how will such a thing be prevented in the future?
1. Paul FarrowModerator 15 Mar 2016 at 11:34 am
  
  Hi Philip
  We were attracted to Northwest by its technology, which looks to harness the power of the body’s immune system to fight cancer. It’s a broad-based technology for a range of solid tumours and is being trialled in patients who have exhausted all other avenues of cancer treatment. Allegations of financial improprieties and regulatory failure have been published by at least one anonymous source.
  As we said late last year, if the company is going to move into a sustainable position to attract a broader range of investors, that, in turn will give it a runway to complete its clinical trials, it needed to put these allegations to rest once and for all.
  
  Accordingly, we engaged with the board on this matter and in a public filing to the US Securities and Exchange Commission in November, we called for the appointment of an independent non-executive director and the convening of a special committee to investigate the allegations. The the company has initiated an investigation, which it suggested would take several months to complete and we are now awaiting its findings.
Chee Fui Fung 12 Mar 2016 at 5:57 am

Hi thanks Neil for answering our questions. Can you share a bit on how do you guys value R&D-stage companies? Woodford Funds have been investing heavily into biotech companies which their cashflow prospects are far from certain, how do you judge on the success probability and put a number on their value tag?
1. Richard LockingtonModerator 15 Mar 2016 at 11:14 am
  
  The valuation of any pre-revenue firm is challenging and the investment decision has to be based on the underlying technology or research, the management behind the company and the ability to monetise the assets. For biotech firms we consider the end possibilities for each of the assets under development, i.e. the total patient population and the amount of reimbursement which could be received.
  
  As you can imagine this is only the starting point for the valuation of a company which is still in the asset development phase and we then apply a number of discounts to take account of the risk of failure and to ensure that our investors will obtain an appropriate return on the investment.
Alan Victor 12 Mar 2016 at 7:39 am

Despite the volatility of the markets, when do you expect WPCT to start demonstrating some meaningful (and hopefully startling) NAV increases due to your investment strategy? When do you predict we will see the first 10% annual return?
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 9:53 am
  
  Hi Alan,
  Clearly this is difficult to predict but here’s part of an answer that Neil gave to a similar question yesterday, “This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.”
  Kind regards
  Mitch
Paul Pizzala 12 Mar 2016 at 9:26 am

Hi Neil & Team – thanks for the open forum.

My question concerns sustainable investing using frameworks like ESG raised in the light of Mark Carney’s recent speech, “Tragedy of the Horizons” and whether you have any views on this? Also I know that you don’t take an ethical view point in the portfolio per se but wonder what your personal views on smoking, diet and health care are? Do you see any trends in prevention is better than cure?

Regards,

Paul
1. Neil WoodfordModerator 16 Mar 2016 at 6:30 pm
  
  Hi Paul,
  
  I’m not sure my personal views are relevant here, but from an investment perspective it would be great to see a level playing field on health-related policies. The tax burden placed on smokers is disproportionate, for example, when compared to the cost of smoking-related health issues on the NHS. There are other harmful habits that place a considerable economic burden on the state but don’t get taxed at all. Nevertheless, as you say, I do not express an ethical perspective in my investment decisions but that doesn’t mean we disregard socially responsible investing policies. They are important, but only insofar as we need to be assured that a company is conducting itself appropriately – not to do so poses a risk to future value.
  
  Kind regards
  
  Neil
Vikram Aggarwal 12 Mar 2016 at 10:18 am

Neil, which of the companies you hold do you consider most vulnerable to a dividend cut in the coming years?
1. Stephen LamacraftModerator 18 Mar 2016 at 2:21 pm
  
  Hi Vikram,
  
  Any company that sells off part of its portfolio to realise substantial value will no doubt have insufficient cash to fund the current dividend. When I look through the portfolio one stock in particular jumps out as being susceptible to a dividend cut if such a strategy is pursued…
  
  Stephen
Gary Meldrum 12 Mar 2016 at 2:08 pm

Neil with the recent announcement of an activist investor joining the board of Rolls Royce and its subsequent SP rise from £5.00 to £7.00 having a positive effect. My question is as a large investor in Glaxo would you not advocate this method of unlocking value from this business as an alternative to your recent comments on breaking up this business into 4 companies?
Gary Meldrum
1. Stephen LamacraftModerator 18 Mar 2016 at 8:04 pm
  
  Thanks for the question, Gary. ValueAct participation certainly got the Rolls share price moving but as of yet their participation has not changed the long term fundamental value of the company.
  
  Regarding Glaxo we are of the belief that sustainable value can be created without the need for an activist investor actually sitting on the board. A board seat isn’t required to agitate for change.
  
  Kind regards
  Stephen
brian jocelyn 12 Mar 2016 at 4:43 pm

Is Gove right to question the validity of the decision handed down to David Cameron? Your personal verdict please…..
1. Neil WoodfordModerator 16 Mar 2016 at 6:06 pm
  
  Hi Brian,
  
  I would wish to simply refer you to the work we have done on Brexit recently and the independent report we commissioned Capital Economics to write on the likely economic implications:
  https://woodfordfunds.com/insight/brexit-economic-implications/
  
  Kind regards
  Neil
Terrell Orum-Moore 12 Mar 2016 at 5:14 pm

Well I am still waiting for an answer to my question from your blog entitled “Patient Capital Trust update” dated November 2015 which reads…

I’d very much like to know if Mr. Woodford was aware of Katherine Wolf of Ondra’s board affiliation with MacroCure (a company currently involved in a lawsuit with NWBO’s vaccine manufacturer Cognate) when he recommended Ondra as a consultant to Northwest. Does Mr. Woodford know why Ms. Wolf, who was obviously NOT “conflict-free”, was chosen for the Ondra team to meet with NWBO? If not… which is what I’d like to believe… does he intend to make a public statement with regards to this conflict anytime soon? I’ve developed a very high regard for Mr. Woodford as a straight shooter up to this point… and I am very much hoping he was unaware of this relationship beforehand… so my high regard for his business ethics can continue on unabated. Mistakes do happen. Thank you.

I changed the question slightly to account for an update… NWBO is not in the lawsuit, Cognate is. Anyhow… I would very much like an answer to that question and have been waiting “patiently”.
1. Brian Babcock 14 Mar 2016 at 4:42 pm
  
  I am interested in this question being answered as well. Anyone that follows NWBO closely knows it’s a lightening rod and is very close to approval or bust. Please reply in some regard when you have the time.
  1. Robert Dwek 15 Mar 2016 at 3:12 am
    
    Seconded.
2. Paul FarrowModerator 16 Mar 2016 at 6:24 pm
  
  Hi Terrell
  
  Thank you for your question and apologies for the delay in getting back to you. Neil was not aware of Ms Wolf’s affiliation with MacroCure or why she was chosen for the Ondra team that met with Northwest, who, we would add, dealt with the matter in an appropriate manner. We hope this puts your mind at rest.
  
  Paul
  1. Terrell Orum-Moore 16 Mar 2016 at 10:19 pm
    
    Thank you. That really is quite wonderful to know.
    
    I hope that while NWBO has been your biggest loser thus far, it soon turns around to prove one of your fund’s largest winners.
Donald Martin 12 Mar 2016 at 11:34 pm

I live near Chicago Illinois and am interested in invested in the Woodford Funds. I have my accounts with E*Trade right now. What do I need to do.
1. Jon AdairModerator 15 Mar 2016 at 9:02 am
  
  Hi Donald,
  The Woodford Equity Income Fund is only available to UK residents. However Woodford Patient Capital Trust is a publicly traded company and therefore may be available on the E*Trade platform.
Francis Candylaftis 13 Mar 2016 at 8:14 am

How do you take into account in constructing your Patient Capital Trust portfolio the long term investment objective of 10% p.a, in a prolonged environment of 1 or 2% annual growth and 0pct interest rate?
1. Saku SahaModerator 18 Mar 2016 at 8:38 pm
  
  Hi Francis,
  
  The early-stage and early-growth companies in WPCT are less correlated to the macroeconomic environment and this is one of the many reasons why we find the asset class attractive.
  We expect value creation and investment returns to be a result of their own progress – i.e. technical or commercial progress to bring a new product / drug / service to market – rather than because their underlying market is growing quickly or slowly.
  
  That is how we believe we can deliver absolute investment returns of 10% per annum, despite the difficult macro environment.
  
  Kind regards
  Saku
kelvin boot 13 Mar 2016 at 8:43 am

Why is the WPCT performing so badly? What steps are being taken to increase demand for this stock and can we expect a share price improvement soon?
1. Neil WoodfordModerator 14 Mar 2016 at 2:00 pm
  
  Kelvin (and others that have asked similar questions),
  The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded.
  This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the 3 to 5 year time scale we have talked about consistently since launch.
  Kind regards
  Neil
  1. kelvin boot 14 Mar 2016 at 2:27 pm
    
    Thanks Neil, sorry I did not address the question to you directly. Kind Regards Kelvin
  2. Adam Feuerstein 14 Mar 2016 at 2:28 pm
    
    Neil — Can you discuss NWBO in more detail? Obviously, there were a lot of cancer immunotherapy stocks you could have chosen to include in the portfolio, so why did you invest in NWBO? Have you come to doubt your investment thesis in NWBO given recent problems at the company?
    1. Michael Kean 14 Mar 2016 at 2:46 pm
      
      Great question.
    2. Paul FarrowModerator 15 Mar 2016 at 10:44 am
      
      Hi Adam,
      As we have said previously, we were attracted to Northwest by its technology that looks to harness the power of the body’s immune system to fight cancer. As Neil replied yesterday during the live Q&A, we continue to believe in the science behind the DCVax dendritic-cell approach and its long-term potential.
  3. Mark Bishop 14 Mar 2016 at 2:49 pm
    
    Bear market notwithstanding, I think the key point here is that a J-curve is often exhibited in the performance of unlisted companies as they invest prior to reaping the hoped-for rewards.
  4. Ian Hunter 14 Mar 2016 at 3:00 pm
    
    I had asked about intentions to issue yet more shares in the WPCT, amongst other factors such as NAV performance and unlisted company valuations, but my questions seemed to have been edited away into the ether.
    The NAV had fallen below issue price well before the new year began and it was not coincidence that the news of more shares potentially being issued had a coincident effect on premium erosion and shareholder appetite. It might help to at least address the first part of my question.
Hugo Bulmer 13 Mar 2016 at 10:48 am

Hi Neil, Research indicates that stock markets historically have performed well in low interest rate environments. Do you think that it therefore follows that stock markets may perform even better in a negative interest rate environment?
Thanks, Hugo
1. Neil WoodfordModerator 14 Mar 2016 at 2:46 pm
  
  Hi Hugo,
  No, I don’t. A negative interest rate environment would coincide with even lower growth and more deflation, neither of which would be good for equities.
Alastair Milne 13 Mar 2016 at 2:46 pm

Hi Neil,

Woodford Equity Income contains a lot of so called ‘sin stocks’, with a large allocation to tobacco stocks in particular. I know the fund isn’t an ethical / SRI fund, and that these stocks are selected based on your assessment of their investment merits. However, many people struggle with investing in companies which sell products which are widely believed to addict and do serious harm to their consumers. Have you ever considered a separate ethical or ‘tobacco free’ version of your fund?

Thanks

Alastair Milne
1. Stephen LamacraftModerator 17 Mar 2016 at 4:09 pm
  
  Hi Alistair,
  
  This is not something we have considered to date, although it’s worth noting that the Woodford Patient Capital Trust has no tobacco exposure. I do believe, however, that the large quoted tobacco companies are best placed to bring innovation to the consumption of nicotine and will be instrumental in greatly reducing the harm that smoking causes.
  
  Kind regards
  
  Stephen
Neil Southall 13 Mar 2016 at 4:24 pm

Neil
Can you highlight any particular information in company annual reports you use in making an investment decision?
Do you carry out research individually or as part of a team?
1. Stephen LamacraftModerator 17 Mar 2016 at 4:08 pm
  
  Hi Neil,
  
  Annual reports are little gold mines and contain a wealth of information. Never take the headline adjusted numbers presented on the first few pages as a given. These are often highly flattering! Research is often conducted individually (in my case) or in pairs (for the unquoted team) but it is then discussed more widely. We have a more formal weekly catch-up meeting but discussions are typically ad hoc – Neil has a separate office but the door is always open and, more often than not, there is invariably somebody from the investment team chatting away inside.
  
  Kind regards
  
  Stephen
s smith 13 Mar 2016 at 4:36 pm

Hi
going forward over the next 12 months with the companys that you are currently invested in which 2 excite you the most.
kind regards
s smith
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:18 pm
  
  Hi there,
  
  Neil didn’t have time to answer your question in the allotted time but I’m pretty sure he would have said that he couldn’t pick out specific shares, particularly on a 12 month view. Suffice to say, on a 3-5 year view we have positive expectations for all shares in the portfolios.
  
  Kind regards
  
  Mitch
Mary Yugo 13 Mar 2016 at 5:02 pm

Can you comment on the due diligence used to vet the investments in Andrea Rossi and Industrial Heat and their work in low energy nuclear reactions (LENR)/cold fusion as power sources? Specifically, if you know, who were the experts who tested the rather extravagant claims? Did you know of Rossi’s checkered past and criminal history in Italy?
1. Paul FarrowModerator 15 Mar 2016 at 11:09 am
  
  Hi Mary
  We follow a thorough due diligence process for all our investments, irrespective of their size or the fund they are invested in.
  
  With regard to Industrial Heat, we were, and have been, very aware of the scepticism about LENR technology. The company is currently working with numerous scientists and is acquiring both the technology and teams required to maximise the potential of this, and other, new energy technologies.
  The company recently said that it is willing to invest time and resources to see if this technology might be an area of useful research in its quest to eliminate pollution. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
  1. Mary Yugo 16 Mar 2016 at 7:47 am
    
    Thanks! I wish you luck with this but skepticism about LENR is soundly based. Many scientists who have examined the papers in this field (LENR) have remarked that the research results are rarely replicated and the entire field lacks quality of experimental design. Some of the advocates are sincere but do not seem to be good scientists. Others, sadly, seem to be simply crooks, like Defkalion Green Technologies, which made huge claims and then about a year ago, disappeared from the scene without a trace, taking invested funds with them.
    
    Again, I hope your efforts succeed and to that end, I urge you to get the best consultants possible, including some of the better known skeptics from reputable universities and companies. Or, for a competent and completely impartial review, you may wish to consider consulting with EarthTech International of Austin Texas.
    
    Best wishes, M. Y.
alan bilbie 13 Mar 2016 at 8:36 pm

Good Afternoon Neil , As the fund now exceeds £8 billion and no doubt will continue to grow , is there a limit to the fund size given that it is mainly invested in UK companies or will you seek to invest on a more global basis over time ?
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:54 pm
  
  Hi Alan,
  
  Yes, there probably is a limit to fund size but we don’t believe we are anywhere near it yet. Ultimately, we need to ensure that the amount of assets that Neil manages doesn’t start to constrain his ability to deliver the attractive long-term returns that investors have come to expect. If that ever starts to become the case, we would do something about it but it’s unlikely that that would involve a more global remit. We wrote about this in a piece called local vs global last year: https://woodfordfunds.com/local-vs-global/
  
  Kind regards
  
  Mitch
  1. alan bilbie 17 Mar 2016 at 8:28 pm
    
    Hi Mitch , thanks for your reply. It would appear that I missed reading the piece local vs global which is a very interesting article , this clarifies the true geographical spread of the fund . Best regards Alan
Stuart Baldry 13 Mar 2016 at 10:32 pm

Hi Neil, I have invested in both your funds and also Fundsmith – Terry Smith says he does not invest in biotech companies and has given a good argument why, can you comment on why you do and continue to hold them – would really like your view so I can have a balanced view.
Many Thanks
Stuart
1. Neil WoodfordModerator 14 Mar 2016 at 2:30 pm
  
  It’s worth remembering, Stuart, that many different portfolios can do a good job for investors. We continue to believe in the secular growth drivers across the healthcare industry. Not all biotechs will be winners, in the same way that not all pharma stocks will be. However, the companies we have selected in these sectors, we believe, will deliver long-term value for investors. We will follow up with a more in-depth article on this subject on the blog, focusing on why we like the sector in general and the specific attractions of the companies we’ve invested in.
Paul Trinder 14 Mar 2016 at 6:20 am

Given recent performance of the WPCT fund, do you have any concerns regarding the fee structure in place and with the fund now trading at a discount to the NAV, will this affect the further fund raising activity planned?
1. Paul FarrowModerator 16 Mar 2016 at 10:12 am
  
  Hi Paul
  
  The rationale for our fee structure remains very much in tact. It aligns fund manager and investor, reflecting the conviction that we have in this uniquely attractive long-term investment opportunity. Regarding the fundraising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon.
Jonathon Peart 14 Mar 2016 at 7:32 am

Do you think Lloyds bank has turned the corner and is now worthy of investment, or are you still negative on this Bank, as you are with others in the sector? Many thanks
1. Neil WoodfordModerator 14 Mar 2016 at 2:08 pm
  
  Hi Jonathon,
  In general I remain very cautious about the investment attractions of the banking sector. With respect to Lloyds, albeit much improved and arguably more investable than at any stage since the crisis, it is still not sufficiently attractive to warrant a place in the funds. One thing that continues to concern me is the exposure to the UK housing market. Any correction here would shatter the consensual view that its balance sheet is rock solid.
  Kind regards
  Neil
  1. Jonathon Peart 14 Mar 2016 at 4:23 pm
    
    I really appreciate your reply. No one knows for certain, but as our hero Warren Buffet (dare I say it) has suggested I would suspect that interest rates will remain lower for longer than people anticipate. This will probably support the housing market. Time will tell. Over time the banks will recover as we need them, the regulators will back away and then in further time the banks will get greedy and make a mess of it again. Hopefully not for a while though!! Kind regards Jonathon
John Barton 14 Mar 2016 at 8:23 am

Dear Neil, You invest some of your funds indirectly in Industrial Heat LLC, Andrea Rossi’s company. Will you be increasing your investment, in order to scale up his research? (I hope you are going to say yes). John
1. Paul FarrowModerator 15 Mar 2016 at 11:10 am
  
  Hi John,
  Industrial Heat is currently working with numerous scientists and has a strategy to build a diverse portfolio of innovative technology assets to maximise the potential of new energy technologies. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
Algirdas Toleikis 14 Mar 2016 at 9:53 am

GENETIC ENGINEERING. Any plans to invest into CRISPR/Cas9 companies?
It looks like we are at the dawn of genetic engineering.
1. Lucinda CrabtreeModerator 18 Mar 2016 at 8:26 pm
  
  Hi Algirdas,
  
  We are very familiar with the advancing technologies and developments in this space and, as with many other emerging areas, we continue to monitor it very closely.
  
  Kind regards
  Lucinda
Philip Taylor 14 Mar 2016 at 11:13 am

I’m currently an investor in both Woodford investments, but I am increasingly concerned that my investment into the Patient Capital Trust is not performing anything like it should (I do understand that patience is certainly the key here)
The fund got off to a good start and built a large unhealthy premium, but as since dropped back by a hefty 35% or so from its high last year. I also get the impression that if and when the price does start to recover you may issue more shares to generate more funding, thus putting further downward pressure on the price. I do get the impression that return, certainly in the short term, is not a priority but revenue raising is more important?
A 10% growth in NAV increase p.a. currently seems a long way off to me?
1. Paul FarrowModerator 15 Mar 2016 at 11:12 am
  
  Hi Philip
  Neil replied to a similar question yesterday:
  
  “The weakness of the WPCT share price and NAV since the start of 2016 has been the product of the pretty severe sell-off in shares across healthcare, biotech and early-stage quoted stocks, both here in the UK and in the US. Much of this, we believe to be driven by short-term positioning and rotational activity amongst the fund management community. We don’t believe that it is driven by a correction of over-valuation, nor by a deterioration in fundamentals. We remain very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded.
  
  This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the three- to five-year time scale we have talked about consistently since launch.”
Jenny Griffiths 14 Mar 2016 at 12:18 pm

Hi Neil
On the whole, with the recent dividend cuts and earnings downgrades do you consider the UK market to be good value?
Regards, Jenny Griffiths
1. Neil WoodfordModerator 14 Mar 2016 at 3:00 pm
  
  Hi Jenny, we have highlighted earnings and dividend risk in the UK market for some time now. I have been cautious about the index as a result and remain so. Having said that, I remain fully invested because I am able to find a small group of very attractive, undervalued stocks within the market.
  1. Jenny Griffiths 14 Mar 2016 at 3:09 pm
    
    Many thanks Neil
Edward Jones 14 Mar 2016 at 12:30 pm

Hi Neil,
I anticipate a large downturn in Equity indices (starting in the US but deep enough to affect all). I may not be correct but if I am would your strategy be to continue to hold your chosen equities throughout a severe correction (on the basis that you had chosen well in the first place and they will recover) or to liquidate some (most?) in order to be able to buy them again more cheaply?
Just can’t think we are at the beginning of a good rally and wondering what is best to do.
I’m mostly in cash at present.
TIA Edward Jones.
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:54 pm
  
  Hi Edward,
  
  Brave call! Our strategy would be to remain fully invested so long as the portfolio contained shares which we believe would deliver attractively positive long-term returns. That is currently the case. If the alternative is cash, the bar is very low and easily jumped, particularly when you consider the dividend yields available on many of the high quality, dependable growth stocks that we are invested in.
  
  Kind regards
  
  Mitch
  1. Edward Jones 20 Mar 2016 at 3:38 pm
    
    Many thanks for your insight. Perhaps I should stop trying to micro-manage a longer term process.
Mark Stephenson 14 Mar 2016 at 12:55 pm

Hi Neil, I am interested in your view regarding negative interest rates being employed by central banks and how this affects your decision making regarding acceptable levels of valuation as the herds need for income must surely push valuations of that crowded space even higher.
1. Mitchell Fraser-JonesAuthor 16 Mar 2016 at 6:19 pm
  
  Hi Mark,
  
  Thanks for your question. The funds have been positioned for a deflationary environment for some time. We believe the funds can continue to deliver an attractive long-term return, even in a period of deflation, but the market as a whole would probably struggle. A negative interest rate environment would coincide with even lower growth and more deflation, neither of which would be good for equities in general. However, the attraction of decent dividend yielding stocks with secure and sustainable growth prospects would be all too clear in such an environment. Valuations may, as a result, be pushed higher. There is a parallel with the “nifty-fifty” market environment in the US in the late-1960s, which developed into a bubble and ended badly. We would need to remain vigilant of valuation excess in an environment like that (as indeed we always are) but in the meantime, we believe the portfolios are positioned very appropriately for the current challenging environment.
  
  Kind regards
  
  Mitch
Tung-Chin Wu 14 Mar 2016 at 1:01 pm

Hello Neil,

Can you share your view on oil prices and commodities in general? Do you believe that the price has bottomed and will begin to move up, or not? Also, in regards to WPCT, are you worried about a potential bubble in the private market for some of the tech and biotech companies the fund is invested in?

Thanks
1. Mitchell Fraser-JonesAuthor 17 Mar 2016 at 3:55 pm
  
  Hi Tung-Chin,
  
  It’s not clear where the underlying price of commodities will end up and there are some strong arguments to suggest that on a medium-term view prices may have fallen too far. However, from a demand perspective the risks seem to be mounting and, as cost curves shift down to catch up with the price declines, the supply response is far from certain.
  
  Regarding WPCT, in short, no, far from it. With very few investors willing to embrace the long-term ‘patient capital’ approach required to deliver successful outcomes for early-stage businesses, there remains a lack of appropriate capital. This lies at the very heart of the investment opportunity. The demand for capital from early-stage companies is high but the supply of it is very low – the long-term returns on capital that is deployed, therefore, are potentially very attractive.
  
  Kind regards
  
  Mitch
James Kenton 14 Mar 2016 at 1:28 pm

Hi Neil, the WPCT invests considerably in early stage Pharma comapnies amongst others, but what other sectors do you beleive will offer good value in say the next 10 years?

Thanks, James Kenton
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:38 pm
  
  Hi James,
  
  We view every investment opportunity on the basis of its individual merits. We are stock pickers, rather than top-down sector allocators. Having said that, sometimes certain sectors will offer up an abundance of attractive individual opportunities at the same time. As you have identified, one such sector at the moment is pharmaceuticals, although we would widen that to include the broader healthcare spectrum: devices, biotech, outsourcers. We continue to believe in the secular growth drivers across the healthcare industry. Not all companies will be winners, in the same way that not all pharma stocks will be. However, the companies we have selected in these sectors, we believe, will deliver long-term value for investors.
  
  Elsewhere, the sector allocations on the fund & trust facts pages of this website should give you a very strong indication of where we are finding long-term value (and indeed growth) currently.
  
  Kind regards
  
  Mitch
Pablo Menap 14 Mar 2016 at 1:29 pm

Hi Neil,

Two part question: First, just wanted to know what your take is on the decline in performance and increased volatility the UK stock market might suffer as we approach the June referendum? Secondly, whats your view on the Airline industry stocks (given low oil prices now and possible in the long term) and particularly Easy Jet as potential investment for the fund?

Thank you
1. Stephen LamacraftModerator 17 Mar 2016 at 4:06 pm
  
  Hi Pablo,
  
  Uncertainty will likely manifest itself in increased volatility in advance of and potentially post the referendum (depending on the outcome). Given the unpredictable nature of stock markets in the short-term we are not inclined to make predictions on short time scales, but there is definitely downside risk for the market as a whole. It’s worth remembering that our portfolios look nothing like the market, however, and the strategy has been positioned for some time to cope well with uncertainty and a challenging economic outlook.
  
  There are many winds that blow the airline stocks around and, as such, capitalising any given year’s cash flow is fraught with danger. Although I can appreciate their merits in terms of cash generation and cash returns – and, of course, that this time it may be different (!!) – I tend to prefer mature companies that are more in control of their destiny where, even if free cash flow is lower, it’s more readily capitalised. This way, it’s far easier to ascertain potential undervaluation. Albeit switching sectors, commodity stocks have been a great recent example of where you have to be very careful when capitalising cash flows (as an assumed annuity) in any given year.
  
  Kind regards
  
  Stephen
Sam 14 Mar 2016 at 1:31 pm

Hello Neil
What was your due diligence before
you invested in international heat
and Rossi Ecat and IH other investments.
Thanks Sam
1. Paul FarrowModerator 15 Mar 2016 at 11:13 am
  
  Hi Sam
  We follow a thorough due diligence process for all our investments, irrespective of their size or the fund they are invested in. Industrial Heat is currently working with numerous scientists and has a strategy to build a diverse portfolio of innovative technology assets to maximise the potential of new energy technologies. The company is willing to invest time and resources to evaluate whether LENR technology might be an area of useful research in its quest to eliminate pollution. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
Clive Smith 14 Mar 2016 at 1:45 pm

Hi Neil, I am interested in your views on investment in Social Enterprises as a possible catagory for investment capital or whether WPCT would see this as a valid sector. The area of Social Enterprise is one that I believe will grow over time as business seeks to establish better community relationships and strike a balance between net profit and social conscience
1. Paul LamacraftModerator 18 Mar 2016 at 2:21 pm
  
  Hi Clive,
  
  Social Enterprise absolutely has a role in establishing better community relationships, however, this is unlikely to be an area of focus for the WPCT which is more focused on early stage businesses with significant growth potential.
  
  Paul
James Beldham 14 Mar 2016 at 1:46 pm

Hi Neil,

Will the fund be focusing on growth or dividends this year?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:38 pm
  
  Hi James,
  
  Both. The equity income fund aims to deliver a high-single digit annualised return over the long-term. This is derived from primarily from dividend yield and dividend growth. Clearly there is no guarantee that this aim will be fulfilled, particularly over shorter-time periods but we are confident that the portfolio is well-placed to deliver both income and capital growth on a 3-5 year view.
  
  Kind regards
  
  Mitch
Matthew Pertici 14 Mar 2016 at 1:55 pm

Hi Neil,

Was is the results of the questionaire will filled in regarding the issue of new shares to the Woodford Patient Capital Trust.

Thanks
1. Paul FarrowModerator 15 Mar 2016 at 3:04 pm
  
  Hi Matthew
  
  Many thanks for your question. We intend to share the findings of the survey shortly and we’ll ensure we give you a nod once they have been published.
Billy Bob 14 Mar 2016 at 2:15 pm

Can you provide any more information on the Industrial Heat (IH) investment – what percentage of IH do the funds own? – can you commented on the one-year ECat test? Thanks
1. Paul FarrowModerator 15 Mar 2016 at 11:13 am
  
  Hi Billy
  We do not disclose how much we own of any of our unquoted holdings. Regarding the one year test, Industrial Heat is currently working with numerous scientists and has a strategy to build a diverse portfolio of innovative technology assets to maximise the potential of new energy technologies. We share this quest for what we believe will be a significant development and exploitation of new energy sources.
Adam Wilkins 14 Mar 2016 at 2:15 pm

How many of the companies in the WPCT do you think will fail and how many will succeed? I’d suggest if they all succeeded then there wasn’t enough risk.
1. Richard LockingtonModerator 18 Mar 2016 at 9:02 pm
  
  Hi Adam,
  
  As you point out, it is the nature of investing in early-stage companies that not all of them will progress in the way that was envisaged when the investment was first committed. There will inevitably be some successes and some failures but we don’t have an expected ratio in mind.
  
  That’s not to say that we can’t influence outcomes. Before we invest in a company, we undertake extensive diligence to get comfortable around the risks we are undertaking and attempt to reduce those risks to an acceptable level. Clearly, we wouldn’t go into an investment with the expectation of failure and we carefully monitor key risk areas we have identified prior to investment. If problems are encountered, we do our best to help the company overcome them.
  
  Kind regards
  Richard
David Frazer 14 Mar 2016 at 2:16 pm

Hi Neil, do you and your team invest substantially in the fund (always a re-assuring sign)? In light of your predications of potentially gloomy times – in your view how do UK equities, and specifically the ones you hold, compare to other areas to invest in – global equities, cash, property, bonds etc. Thanks.
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:39 pm
  
  Hi David,
  
  Yes – Neil responded to a similar question with this earlier in the week:
  
  “My personal wealth is invested in the Woodford business and in the Woodford funds (including my pension). I have no other investments other than the house that I live in.”
  
  Purely on the basis of valuation (and nowhere is this more evident than in yield terms) UK equities in general compare favourably to other asset classes currently, in our view, but it is very important to be selective. Some stocks are much more vulnerable to the ‘gloomy times’ than others.
  
  Kind regards
  
  Mitch
Richard Boulton 14 Mar 2016 at 2:18 pm

Hi Neil,

There is general concern that GSK is not investing enough for the future/having a dividend policy that is unlikely to be progressive; if the board do not fancy a break-up of the business and the status-quo remains are you likely to sell this investment? Thanks, Richard.
1. Stephen LamacraftModerator 17 Mar 2016 at 4:07 pm
  
  Hi Richard,
  
  There are numerous reasons to hold Glaxo beyond the potential for a restructuring. Even in its current guise it could be profoundly undervalued. There is, as yet, no guarantee that a break up of the business will occur and, as such, tying capital up purely on the “sum of parts” proposition would not be prudent. Indeed, were any break up to happen, there is a risk that it would be a number of years away, during which time there is, as always, an opportunity cost of capital.
  
  We would sell Glaxo if we no longer believed it to be undervalued taking all eventualities into account, or if the appeal of other investment opportunities started to displace it.
  
  Kind regards
  
  Stephen
Carolyn Ryan 14 Mar 2016 at 2:18 pm

Who do you admire in the world of investing or business. Who has been a particular influence on you and why?
1. Neil WoodfordModerator 16 Mar 2016 at 6:20 pm
  
  Hi Carolyn,
  
  Over the thirty or so years I have been doing this I have encountered many people that I have admired and who have influenced, profoundly how I have developed as a fund manager. Warren Buffet is someone who features prominently on that list as do a number of feature writers on the FT. More recently, as I have invested in more early stage, science based businesses, I have been very lucky to have met and invested alongside some of the worlds leading scientists and have learned a huge amount from them too.
  
  Neil
Adam Horn 14 Mar 2016 at 2:19 pm

Hi Neil

You now have a long tail to the fund, can you please explain why you now have so many small more speculative (presumably) growth stocks in the fund.

Thanks

Adam
1. Neil WoodfordModerator 14 Mar 2016 at 2:50 pm
  
  Hi Adam, for many years now my funds have had exposure to a portfolio of interesting and potentially exciting small stocks. Typically, these have been focused on disruptive and scalable technologies in healthcare and in other sectors. I remain convinced that these positions can make a very meaningful contribution to portfolio returns over the medium-to-long-term, as they have done in the past.
Eugene O'Hara 14 Mar 2016 at 2:19 pm

GSK lack of performance over recent years is continuing and albeit the company is in the midst of changing strategies in its market focus, how long do you give it before making decisions about its weighting within the fund, and the extent to which that weighting might change?
1. Stephen LamacraftModerator 16 Mar 2016 at 6:27 pm
  
  Hi Eugene,
  
  There are many reasons why Glaxo is a considerable holding in the fund, the potential for strategy change being but one. We constantly assess its weight in the portfolio – there is an opportunity cost of holding every share we own. There are no sacred cows. If, at any point, we deem its valuation insufficiently attractive relative to the other stocks that we could own, (even taking into account a potential sum of the parts valuation) it need not feature at all.
  
  Stephen
Sean Watson 14 Mar 2016 at 2:20 pm

Hi Neil,

Do you think oil stocks are starting to look like good value and may be a good contrarian buy? Also, do you have any certain golden criteria that all your stocks must meet in order for you to invest in them?

Regards
Sean Watson
1. Neil WoodfordModerator 14 Mar 2016 at 2:39 pm
  
  Hi Sean, All stocks in my portfolio share a consistent characteristic: their share prices undervalue their intrinsic worth, in my opinion. That is the only golden criteria. As for oil, I remain cautious about the investment attractions of this sector. Whilst oil prices remain below $60-70 per barrel, the global integrated majors fail to generate sufficient cash flow to fund growth in the business and dividends. Currently dividends are being paid from asset disposals or by increasing borrowings. In other words, they are unsustainable unless oil prices rise significantly. In my view, oil market fundamentals do not support this sort of rally in the price of oil.
  1. Sean Watson 14 Mar 2016 at 2:50 pm
    
    Brilliant, thanks Neil. Appreciate your time.
Paul Clarke 14 Mar 2016 at 2:22 pm

Hi Neil, If you were starting out in asset management today, what advice would you give to your younger self? What’s the secret of longevity in the industry? Thanks, Paul
1. Neil WoodfordModerator 16 Mar 2016 at 6:22 pm
  
  Hi Paul,
  
  I would recommend a good grounding in the analysis of the fundamentals of economies and businesses. Similarly, I would encourage the younger me to recognize that it is a fools errand to attempt to add any value in the short term. The industry is already littered with too many busy fools. A clear focus on the long term with a patient but vigilant approach is one I would recommend. Finally, I believe it is important to understand the socially useful function a fund manager can perform when focused on what really matters.
  
  Neil
drew millard 14 Mar 2016 at 2:23 pm

How long do you think it will be before there is a revival in the biotech sector?
1. Lucinda CrabtreeModerator 18 Mar 2016 at 8:34 pm
  
  Hi Drew,
  
  It is difficult to put a definitive timeline on this. Even prior to the the recent sell-off we saw a significant opportunity in the sector and the valuation appeal is all the more apparent now. As far as the businesses we have backed are concerned, we are absolutely convinced that the very attractive and undervalued pipeline assets will ultimately shine through.
  
  Kind regards
  Lucinda
Fred Martin 14 Mar 2016 at 2:28 pm

Hi Neil, are you happy with the AA’s current debt level? It is obviously a great business and can afford its interest cover currently but in 5/10 years time what debt level would you as (an over 10%) owner like to see? And do you consider the management share schemes reasonable also? Thanks
1. Stephen LamacraftModerator 16 Mar 2016 at 6:28 pm
  
  Hi Fred,
  
  We do consider the management share schemes reasonable given the value we feel management bring to the table. The AA has proven itself to be a very stable business and as such could shoulder a reasonable burden of debt.
  
  When net debt gets down to perhaps the 4-5 x EBITDA level then a conversation needs to be had as to the uses of surplus cash going forward (all being well, well in advance of the 5-10 year mark). A potentially stable (indeed gently growing) double digit (%) cash return is possible at the AA but we wouldn’t want the company to feel unduly stressed by the level of debt on the balance sheet.
  
  Conversely, it would be inefficient if it de-levered too far. Of course, a more generous cash return doesn’t mean that all surplus cash needs to be returned so perhaps there could be a gradual ramp up in distribution as we approach the 4x level. I.e the company can de-lever and return significant amounts of cash at the same time. A conversation for a later date however….
  
  Stephen
Jonathan Dawson 14 Mar 2016 at 2:29 pm

Given that the uk equity markets are now fully (some would say over) valued, what is your strategy for protecting against downside risks? Do you agree that the current economic policy is perpetuating a debt-fuelled bubble which is the only driver of slow economic growth? How are you positioning your portfolios for when this finally bursts and there is a major correction to markets with high levels of bad debt and no economic levers to boost growth?
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:39 pm
  
  Hi Jonathan,
  
  As you will know, we focus on absolute risk and on delivering a positive return over the long term. As such, protecting against downside risk is key. This is a volatile asset class, however, and we accept that in the pursuit of an attractive long-term returns we have to tolerate the prospect of short-term losses. However, we believe our disciplined strategy, with a focus on valuation and diligent stock picking, can help us prevent any temporary losses of capital becoming permanent.
  
  We would agree that current economic policy risks perpetuating a debt-fuelled bubble but don’t agree that it is the only driver of slow economic growth. There are others – the lack of productivity, demographics, deflation, all interlinked – but certainly, policy is doing nothing to help them and could actually be making them worse.
  
  We have been concerned about all of these factors for some time, constructing the portfolio with them in mind. As a result, the core of the portfolio remains positioned towards attractively valued, dependable growth opportunities which are capable of delivering growth even in a challenging macroeconomic environment. Meanwhile, the fortunes of our smaller positions in earlier-stage companies with considerable long-term growth potential will be largely determined by their own progress, not by macroeconomic factors. On balance, therefore, we remain confident in the portfolio’s ability to continue to deliver attractively positive long-term returns. But, in all likelihood, it’s going to be tough…
  
  Kind regards
  
  Mitch
Matthew Pertici 14 Mar 2016 at 2:30 pm

If you don’t achieve your performance fee over the next 5-10 years, is their not a danger that you will get bored by the fund and move on to pastures new leaving investors high and dry. I say this because each year you are falling 15% behind. Making it more and more difficult to get your fee.
1. Paul FarrowModerator 16 Mar 2016 at 6:25 pm
  
  Hi Matthew
  
  The rationale for our fee structure remains very much intact. It aligns fund manager and investor, reflecting the conviction that we have in this uniquely attractive long-term investment opportunity. What’s more we are very pleased with the underlying progress of the businesses in which we have invested in the trust. Indeed, in what has been a pretty short space of time since launch, our expectations for the underlying performance of many businesses in the portfolio have been exceeded. This is a long-term vehicle. We hope to deliver good performance in the short-term but believe we should be judged over the three- to five-year time scale we have talked about consistently since launch.
  
  Paul
Eli Silberman 14 Mar 2016 at 2:30 pm

You sold out of Velocys some time ago.Now with the oil price back slightly up and share much lower.Would you consider buying back now or would you think the technology isnt working.
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:43 pm
  
  Hi Eli,
  
  We continue to monitor the company’s progress but I’m afraid we can’t comment on investment decisions that may or may not take place in the future.
  
  Kind regards
  
  Mitch
Alan Payen 14 Mar 2016 at 2:33 pm

Hello Neil

I am thinking to wait until the latest rally in share prices to peter out, probably in April, sell all my stocks, then buy back after the EURO elections. What are your thoughts on this strategy?

Alan
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 8:02 pm
  
  Hi Alan,
  
  Brave call! There is a reason why we’re long-term…
  
  Our strategy is to remain fully invested so long as we can populate the portfolio with shares that we believe can deliver attractively positive long-term returns. That is currently the case. If the alternative is cash, the bar is very low and easily jumped, particularly when you consider the dividend yields available on many of the high quality, dependable growth stocks that we are invested in.
  
  Beyond that, we do not have the relevant regulatory permissions to allow us to give financial advice. The answer will depend on many things, including your attitude to risk, your tolerance to losses and your investment horizon. If you are unsure about what to do, we would strongly recommend you seek financial advice.
  
  Kind regards
  Mitch
Joe Brooks 14 Mar 2016 at 2:35 pm

Hi Neil

I have recently started Day Trading and would like your views, if indeed you have any, on where you think the Oil Price will settle under current trading conditions

Thanks Joe Brooks
1. Stephen LamacraftModerator 15 Mar 2016 at 12:22 pm
  
  Hi Joe, the market chatter seems to be around the $60 mark but quite frankly the market didn’t predict it going to $140 nor did it predict it hitting $30 so I wouldn’t put too much weight on any market prediction of a commodity price. The current price is certainly historically very low but then the world is facing unprecedented synchronised headwinds.
Christiane Montavon 14 Mar 2016 at 2:36 pm

Hi Neil,

What’s your view about investing in the renewable energy sector? With the COP21 commitments and current growth rate of installation in both solar and wind, there must be long term opportunities. I’m thinking of the large wind developments no longer being funded on balance sheets, as well as research in the field of improved energy storage. As a small investor, I’d be quite happy to invest along this route, more so than in the tobacco industry. Thank you
1. Neil Woodford 21 Mar 2016 at 7:46 pm
  
  Hi Christiane,
  
  All renewable investment requires state subsidies to be economic. Whilst this remains the case, returns will, in part, be subject to political whim. Renewables are also long term, capital intensive projects with technology risk embedded but which is not always recognised or priced appropriately. Having said that, we do have some exposure to this sector in the funds through our holding in Drax which, although challenged, is a key part of the UK’s energy infrastructure.
  
  Kind regards
  Neil
Jonathan Eley 14 Mar 2016 at 2:39 pm

The government is thinking out loud about splitting off parts of Network Rail, such as major stations and the power distribution assets. These could – in theory at least – be “bond proxies” in an industry that is still growing quite rapidly. Do you think they would make interesting investments?
1. Neil WoodfordModerator 14 Mar 2016 at 3:05 pm
  
  Hi Jonathan, as ever, it depends on price, but these could be interesting infrastructure investments. There is of course an increasing appetite for these sorts of assets.
Todd Wenning 14 Mar 2016 at 2:39 pm

What book or books have most influenced your investment philosophy?
1. Neil WoodfordModerator 14 Mar 2016 at 2:53 pm
  
  Hi Todd, Warren Buffett’s annual letters to shareholders are unrivalled. One book I would recommend, which helped me during the tech bubble is “Popular Delusions and the Madness of Crowds” which was written in the 19th century I believe.
  1. Daran Joshi 14 Mar 2016 at 2:58 pm
    
    Great recommendation – thanks, will have to check this out!
  2. Ian Hunter 14 Mar 2016 at 3:02 pm
    
    …indeed an excellent book
  3. Todd Wenning 14 Mar 2016 at 3:07 pm
    
    Thank you very much, Neil. If you haven’t already read Will Thorndike’s “The Outsiders”, I highly recommend it – some great profiles of exceptional CEOs (Buffett is one of them). Best, Todd
Sam Shaw 14 Mar 2016 at 2:40 pm

Hi Neil

Love this format – great idea.

As a long-term investor in both blue-chip and smaller companies in the pharma/healthcare/biotech spaces, where are you seeing particular value at the moment (given your comment below about the sell-off creating opportunities, and the ongoing M&A in larger companies)? Any new themes or names worth noting?

Thanks, Sam
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:39 pm
  
  Hi Sam,
  
  Thanks for the feedback – glad you enjoyed it. I’m sorry we were unable to answer your question any sooner. I would encourage you to read our monthly roundup for view on recent changes to the portfolio.
  
  https://woodfordfunds.com/insight/february-2016/
  
  Kind regards
  
  Mitch
adam stone 14 Mar 2016 at 2:42 pm

You are a big fan of healthcare stocks. Does potential US legislation capping drug prices affect your outlook for this sector
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 9:22 pm
  
  Hi Adam,
  
  No. It certainly needs considering but we stand by the views outlined in this article last year:
  
  https://woodfordfunds.com/rewarding-innovation/
  
  In short, we believe that true innovation in the healthcare sector will continue to be appropriately rewarded.
  
  Kind regards
  Mitch
David Hunter 14 Mar 2016 at 2:44 pm

I`ve held tobacco shares since the 90`s. They have continually performed well and you have always been a fan of them too. Do you see anything to that might pose a risk or indeed enhance their valuations in the future ? BAT is currently at 4100p. They can`t surely just keep going up ? Do you foresee them as always being a core holding? Many thanks.
1. Neil WoodfordModerator 14 Mar 2016 at 2:58 pm
  
  Congratulations on a very good investment decision David. As long as the share prices continue to undervalue the intrinsic worth of the businesses, I will remain a holder of these companies. In the last twenty years, the gap between price and value has been wider than it is now, but it is still wide and, by implication therefore, attractive, in my opinion. That is why I continue to own these stocks.
  1. David Hunter 14 Mar 2016 at 3:02 pm
    
    Many thanks for your time. It`s always reassuring to hear your views on this and all the other topics today. I believe tobacco shares still offer very reliable dividend streams.
Jan Czezowski 14 Mar 2016 at 2:46 pm

Hi Neil,

Is there a danger that with central bankers around the world debasing their respective currency in order to achieve inflation that people may end up loosing faith in the current financial system and particularly with currencys as a store of value and reflection of hard work. Is the end game a fincancial resetting similar to that after the second world war and the Bretton Wood agreement ?
1. Neil WoodfordModerator 16 Mar 2016 at 6:23 pm
  
  Hi Jan,
  
  You raise some interesting questions which to answer requires some long range judgments about the path of extraordinary monetary policy and its limitations. Although I find myself thinking about these issues a lot, I am not at all sure I have a well thought through answer. What I will say is that the concept of helicopter money (the sort of debasement to which you refer) is a subject that is discussed more frequently among serious economists and commentators. Whether it has any credibility in central bank circles beyond its theoretical status I don’t know. If it ever gains credibility as a policy option I believe it would be implemented in a coordinated, global context and so would require some sort of Bretton Woods multilateral agreement.
  
  Having said that though, this is not something I would expect to happen in the next few years. Convential unconvential monetary policy options have further to run.
  
  Neil
Philippa Cross 14 Mar 2016 at 2:50 pm

Hello Neil, thank you for being ready to take questions today. A quick one about the WPCT: do you think it’s better for the investor to keep this at its current size (it was rather unexpectedly expanded after the initial IPO, of course) – or is it likely that you will be increasing its size again some time in the future, even if this means lower returns for individual investors? Apologies if I haven’t worded this clearly, but I hope you know what I’m trying to express. Thanks in advance.
1. Paul FarrowModerator 18 Mar 2016 at 1:57 pm
  
  Hi Philippa
  
  Many thanks for your question. With patient capital investing we don’t write a blank cheque; we dip a toe in and put money to work; we hold the company to account to help it achieve the benchmarks it has set; if it does, we put more money to work; and if it doesn’t, we stop or withdraw funding. This way of investing on ‘modelled’ expectations also helps manage portfolio risk as it keeps portfolio downside risk exposure to a minimum. But it also means that from time-to-time we may look to raise additional capital for follow-on funding of existing investments or new opportunities. We would hope that this would reinforce our aim of achieving attractive returns over the long term.
  
  Finally, on the subject of a future fundraising, no decision has been made but we will, of course, keep you informed of any developments and would hope to be able to do so very soon.
  
  Thanks
  
  Paul
CHARLES JARVIS 14 Mar 2016 at 2:51 pm

I am not sure why you are suggesting buying now whilst the market addresses the bounce if the indices are suggesting another pullback in the increased volatility. Why no wait for a better buying opportunity????
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:40 pm
  
  Hi Charles,
  
  As long-term investors, we do not make calls on likely short-term market direction. As long as we can build a portfolio of shares that we believe will deliver attractively positive long-term returns, we are likely to remain fully invested. If the alternative is cash, the bar is very low and easily jumped, particularly when you consider the dividend yields available on many of the high quality, dependable growth stocks that we are invested in.
  
  Kind regards
  
  Mitch
Azmina Suleman 14 Mar 2016 at 2:51 pm

Hi Neil, do you have any plans to launch a 3rd Fund this year?
1. Paul FarrowModerator 18 Mar 2016 at 1:57 pm
  
  Hi Azmina
  
  We are continually evaluating our options but as we said at launch (and since) we will not be launching a fund for product sake. It is about finding the right opportunity and the right personnel that fit with our vision and culture.
  
  Thanks
  
  Paul
David Kell 14 Mar 2016 at 2:52 pm

Hi,

I have a stock specific question. I saw potential in RM2 like you, however we seem to be the only ones! Have we made a mistake or do you think they can turn their business around?

David Kell
1. Saku SahaModerator 18 Mar 2016 at 8:18 pm
  
  Hi David,
  
  Thanks for the question, and in respect of RM2, we continue to believe that it has the potential to significantly disrupt the global goods transportation industry. We saw a positive announcement from the company yesterday that they have begun supplying pallets into the supply chain of Loblaw, Canada’s largest retailer. Commercial endorsement is always valuable in validating an underlying technology or product but it often takes time to drive adoption, especially in complex and international supply chains. We remain very confident that the company will ultimately arrive at a successful destination.
  
  Kind regards
  Saku
Piotr Białowąs 14 Mar 2016 at 2:53 pm

Hello Neil,
Would you like to share your general views on investment opportunities in renewables?
Kind regards,
Peter Białowąs
1. Neil Woodford 21 Mar 2016 at 7:46 pm
  
  Hi Piotr,
  
  All renewable investment requires state subsidies to be economic. Whilst this remains the case, returns will, in part, be subject to political whim. Renewables are also long term, capital intensive projects with technology risk embedded but which is not always recognised or priced appropriately. Having said that, we do have some exposure to this sector in the funds through our holding in Drax which, although challenged, is a key part of the UK’s energy infrastructure.
  
  Kind regards
  Neil
Mark Shelton 14 Mar 2016 at 2:55 pm

Do you think that the methods that you use to value early stage companies would be considered to be sufficiently prudent by private investors?
1. Richard LockingtonModerator 16 Mar 2016 at 6:26 pm
  
  Hi Mark,
  
  In short, yes.
  
  The valuation methodologies we use for early stage companies are based on the International Private Equity and Venture Capital Valuation Guidelines 2015 (https://www.privateequityvaluation.com). Valuation is a very subjective process and we aim to take a pragmatic approach which values companies fairly for the assets they have and the progress they have made to date, whilst always being mindful of the level of risk which they still face on the road to success and the level of return we aim to achieve for our investors.
  
  Richard
Joe Brooks 14 Mar 2016 at 2:56 pm

Hi Neal

In light of your exceptional track record and relatively high profile in the industry do you feel any additional pressures to perform when launching a new fund or is it just business as usual.

Thanks

Joe Brooks
1. Mitchell Fraser-JonesAuthor 18 Mar 2016 at 1:41 pm
  
  Hi Joe,
  
  There is always a pressure to perform in the short term and in the long term. Having said that though, the reality is that it is not possible to deliver great performance over all time periods. By definition, in order to deliver superior long term returns as a fund manager, you have to endure periods when things do not go well. Being clear about strategy and why a portfolio is positioned as it is, is vital at times like this, as is communication with clients. These pressures are as relevant for new funds as they are for existing products.
  
  Kind regards
  
  Neil
charlie hill-wood 14 Mar 2016 at 2:59 pm

Hi Neil, what do you make of the ECB’s announcements last week?
David Eborall 14 Mar 2016 at 3:00 pm

Hi Neil,
How actively engaged are you with your investee’s management ? Is it merely keeping tabs on the business or do you actively seek to work with management to create value?
John Chipchase 14 Mar 2016 at 3:41 pm

Hi Neil. I have been investing regularly in Redde shares and am delighted with their performance also their dividends, do you still regard them as a long term investment? Thank you, Regards John Chipchase
James Andrews 14 Mar 2016 at 3:52 pm

Healthcare is c.36% of the portfolio currently. I’m intrigued to know if this is down to a personal preference for this area of the market due to expertise and interest, or if there are particular characteristics of the sector (and companies within it) which you believe means it offers the best risk/return profile in the market.

Many thanks
Paul Pizzala 14 Mar 2016 at 4:09 pm

Hi Neil – in financial services what do you see at the disinter mediators – I see you’ve invested in Seedrs and AJ Bell for instance? Where is the consumer getting value for money and good advice?
Ronald Jong 14 Mar 2016 at 4:30 pm

What are your thoughts on NWBO appointing 2 different directors than the ones you had recommended? What are your thoughts on NWBO terminating the consulting agreement with ONDRA Partners?
1. Kevin Quinn 14 Mar 2016 at 6:38 pm
  
  Hi Neil,
  Would you care to comment on the short selling phenomenon, which seems to be more prevalent in the US. Does it increase the risk of holding early stage companies, particularly in the biotech sector?
  Many thanks
ian wick 14 Mar 2016 at 6:51 pm

Please send me the text of the discussion today(3/14/2016) ,as it is pertinent to NWBO and keep me in the loop for emails on any and all comments or discussions about NWBO.
Thanks
Ian
1. Jon AdairModerator 15 Mar 2016 at 10:56 am
  
  Hi Ian,
  The live Q&A took place in these comments and their associated answers. If you aren’t already, we recommend subscribing to our blog and insight alert emails if you’d like to be kept in the loop. You can subscribe on this page.
Eric Reekie 14 Mar 2016 at 7:49 pm

Hi Neil
Sadly I missed todays discussion forum, I wonder if it is possible for you to let me have your opinion on the following.
I have a gripe about share buy backs versus a company paying a special dividend.
There are many companies that buy their shares back to reduce the shares in issue, which we are told is in the shareholders interest through an increase in the share price. This may be true in a lot of cases. Next in particular who will only buy their shares back if the price is right, if not they will return a special dividend to the shareholders which is great. British American Tobacco is another company that regularly buys back their shares every year but never pay a special dividend. Do they buy the shares back at too higher a price?
Is the method of capitalisations or buy backs in general a method of the management obtaining an increased EPS to maintain, achieve or justify their bonuses?
The people that gain from these action as far as I see it are the stockbrokers and the management. I would much prefer to have the money in my account and then reinvest the proceeds myself in the company, thereby increasing my holding for greater future dividends.
If you have the time to give me a short reply I would appreciate it.

Kind regards

Eric Reekie
John Davy 14 Mar 2016 at 8:42 pm

I was interested in the cautious remarks about risk of shock to the UK housing market when someone asked Neil if he was positive about Lloyds. But I wondered how well that caution fitted with having a significant percentage of the WPCT fund in Purplebricks?
richard 17 Mar 2016 at 3:03 pm

Dear Mr Woodford,

There has been a lot of risk of the economy entering deflation in recent years and you have noted this risk. If this is the case why have you not invested in gilts or treasury bonds which would benefit from deflation. Companies offer a better dividend but if there was deflation the dividend would be cut and might be cut below that of gilts.

Comments are closed.

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