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
Month in numbers
Source: Bloomberg, Office for National Statistics, Federal Reserve Bank of New York, EPFR Global, China Association of Automobile Manufacturers
Number of people (aged >16) in employment in the UK – the highest ever level
European Union’s 2019 growth forecast for the eurozone – downgraded from 1.9%
Public sector budget surplus in January 2019 – the largest monthly surplus since records began
Number of Americans more than 90 days behind on their car loan payments
Eurozone industrial production declines in December 2018, worse than expectations
Weekly pace of European equity fund outflows during February – fastest pace since the Brexit vote in 2016
Sterling / euro exchange rate at its highest level since May 2017
UK GDP growth in Q4 2018 – slightly below expectations
Passenger vehicle wholesales in China fall in January, at fastest rate in more than two decades
Key Company Events
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.
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.