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Investment in Woodford Patient Capital Trust

Investment in Woodford Patient Capital Trust

Richard Parfect, Fund Manager at Seneca Investment Managers, comments on why he has decided to invest in Woodford Patient Capital Trust and provides his thoughts on what some would consider a brave move.

 

Richard Parfect, Fund Manager at Seneca Investment Managers:

  • Why have you decided to invest in Neil Woodford’s Patient Capital Trust? What is it that has attracted you to the Trust?

We feel the discount to NAV does not reflect the recent advances demonstrated by underlying early-stage companies within the portfolio. Private equity investment, particularly in early stage companies, usually involves a “J-curve” of returns. That initial fall in value was seen in the first 2-3 years after its launch in 2015. We believe the recent news flow coming from the trust is evidence that the underlying investee companies are gaining traction on their long-term business plans.

Our successful experience with AJ Bell has shown us over many years the power of investing “patient capital” with private owner managed businesses. Short term hiccups can be managed and addressed without having to worry how the market can react. Early stage private companies and providers of long term capital enjoy a symbiotic relationship.

The NAV of WPCT has not suffered the worst effects experienced by the OEICs managed by Neil Woodford which are more weighted towards listed companies, whereas his unlisted investments have outperformed his listed investments.*

That said, we are long term investors and can appreciate the short-term problems value investing in listed markets can bring, however it is those short-term tests that often lead to the longer-term outperformance.

 

  • Neil Woodford has had a bad run in recent years and he’s fall from grace has been far sharper than expected. He is very much out of favour with both investors and the media and some would say this is a brave move, what would you say back?

Investing and markets are driven by emotions (exacerbated by the huge flows of capital driven by ETFs which have to mirror the impact of those human emotions). The high level of criticism that Neil Woodford has faced is an inevitable result of having been put on a pedestal in the past- such is the way of our industry. Those swings of emotion create a dislocation between price and value (hence the discount to NAV of WPCT) which in turn gives long term investors such as ourselves an opportunity. Whereas some may say our decision is brave, we would say it is a logical outcome of our investment process.

*Source: Northern Trust, Woodford, on a net asset value basis over one and three years to 31.12.18. All other performance information sourced from Bloomberg.

The views expressed are those of Richard Parfect at the time of writing and are subject to change without notice. They are not necessarily the views of Seneca Investment Managers Limited and do not constitute investment advice or a recommendation to invest in Patient Capital Trust. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment.  Seneca Investment Managers Limited (0151 906 2450) is authorised and regulated by the Financial Conduct Authority and is registered in England No. 4325961 with its registered office at Tenth Floor, Horton House, Exchange Flags, Liverpool, L2 3YL. FP19 094.

 

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