February roundup

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Mitchell Fraser-Jones 6 March 2019 Est. reading: 5 min read

February Roundup

Mitchell Fraser-Jones
6 March 2019

“There has been some renewed commentary recently about the shape of the portfolios. Inevitably, I have faced some difficult decisions about what to sell during a period of redemptions, but I have accessed liquidity across the market cap spectrum to ensure the portfolios are exposed to what I believe to be the most attractive opportunities. They are in the shape that I want them to be. In fact, there have been very few occasions over the last thirty years when I have felt more positive about the outlook for the funds I manage.”

— Neil Woodford

Most global equity markets sustained January’s strong performance into February, helped by a dovish tone from the Federal Reserve, a stronger oil price and suggestions of a thaw in China-US trade relations. The UK equity market was no exception, with leadership coming primarily from dollar-earners, such as the large index constituents in the pharmaceuticals, oil and mining sectors.

Month in numbers

Source: Bloomberg, Office for National Statistics, Federal Reserve Bank of New York, EPFR Global, China Association of Automobile Manufacturers

32.6m

Number of people (aged >16) in employment in the UK – the highest ever level

1.3%

European Union’s 2019 growth forecast for the eurozone – downgraded from 1.9%

£14.9bn

Public sector budget surplus in January 2019 – the largest monthly surplus since records began

7m

Number of Americans more than 90 days behind on their car loan payments

-0.9%

Eurozone industrial production declines in December 2018, worse than expectations

$5.9bn

Weekly pace of European equity fund outflows during February – fastest pace since the Brexit vote in 2016

1.1663

Sterling / euro exchange rate at its highest level since May 2017

0.2%

UK GDP growth in Q4 2018 – slightly below expectations

-17.7%

Passenger vehicle wholesales in China fall in January, at fastest rate in more than two decades

Key Company Events

STRONG INTERIM RESULTS

Barratt Developments

DISAPPOINTING TRADING UPDATE

Purplebricks

VERY STRONG RESULTS

Taylor Wimpey

INTERIM RESULTS


Redde

STOCK MARKET LISTING

Proton Partners International

Unquoted asset transaction

As announced last week, the LF Woodford Equity Income Fund (the fund) has recently transferred some of the portfolio’s individual unquoted stocks to Woodford Patient Capital Trust (the trust) in exchange for shares in the trust. This is the conclusion of almost eighteen months of work. We first discussed the concept of moving the equity income fund’s unquoted exposure to a position in the Woodford Patient Capital Trust, in late 2017. It has been a lengthy process involving numerous parties to ensure that it has been executed in an appropriate way and that it is in the best interests of investors on all sides. We want the fund to remain exposed to this part of the asset class because it represents a very exciting and compelling investment opportunity, but this move signals the start of a strategy to switch the fund’s unquoted exposure from individual holdings to shares in the trust

You can read more about the transaction in the original blog post, but we also wanted to take the opportunity to answer some of your follow-up questions.

Conclusion

Our strategy remains focused on avoiding the considerable risks that have built up in equity markets over the last decade of QE-fuelled exuberance and capturing the opportunity that exists in the few parts of the market that have been left behind. For the funds, this results in portfolios that have a strong but selective bias towards profoundly undervalued companies that are exposed to the UK economy.

Elsewhere, the Woodford Equity Income Fund and Woodford Patient Capital Trust portfolios continue to be positioned to capture an exciting long-term opportunity across a range of earlier-stage businesses exposed to the themes of healthcare innovation and disruptive technology more broadly.

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What are the risks?

  • The value of investments and any income from them may go down as well as up, so you may get back less than you invested
  • Past performance cannot be relied upon as a guide to future performance
  • The annual management charge is charged to capital, so the income of the funds may be higher but capital growth may be restricted or capital may be eroded
  • The funds may invest in other transferable securities, money market instruments, warrants, collective investment schemes and deposits – some of these security types could increase the funds’ volatility and increase the level of indirect charges to which the funds are exposed
  • The funds and trust may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of these investments and the income from them, to fluctuate
  • The LF Woodford Income Focus Fund will be invested in a concentrated portfolio of securities – the fund is not restricted by reference to any geographical region, sector or market capitalisation
  • The LF Woodford Equity Income Fund and the Woodford Patient Capital Trust may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value
  • The price of shares in the Woodford Patient Capital Trust is determined by market supply and demand, and this may be different to the net asset value of the trust. This means the price may be volatile in response to changes in demand
  • Long-term outcomes are more binary – extremely attractive rewards for success but some businesses will inevitably fail to fulfil their potential and this may expose investors to the risk of capital losses
  • Young businesses have a different risk profile to mature blue-chip companies – risks are much more stock-specific, which implies a lower correlation with equity markets and the wider economy – it can take years for young businesses to fulfil their potential, this investment requires patience

Important information

Before investing, you should read the Key Investor Information Document (KIID) for the fund – or Key Information Document (KID) for the trust – and the Prospectus which, along with our terms and conditions, can be obtained from the downloads page or from our registered office. If you have a financial adviser, you should seek their advice before investing. Woodford Investment Management Ltd is not authorised to provide investment advice.

The Woodford Patient Capital Trust currently intends to conduct its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at www.fundinfo.com.

 

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

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

© 2019 Woodford Investment Management Ltd.
All rights reserved.

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