Woodford Patient Capital - Why?

[EssDeeAitch]

Just read a piece on WPCT in the Trusts section of Money Observer and I wondered who would buy this trust and why? Not a snide remark at all, I am new to self investing and am just trying to understand what motivates people into certain investments. In this case, returns have been negative (last six months has been positive though) and there is no yield at all. The word "Patient" in the name makes me wonder as well; how patient?

Does anyone see a really strong upside to this trust and what part of a portfolio would this play?

[Itsallaguess]

Just read a piece on WPCT in the Trusts section of Money Observer and I wondered who would buy this trust and why?

Not a snide remark at all, I am new to self investing and am just trying to understand what motivates people into certain investments. In this case, returns have been negative (last six months has been positive though) and there is no yield at all. The word "Patient" in the name makes me wonder as well; how patient?

Does anyone see a really strong upside to this trust and what part of a portfolio would this play?

This isn't a trust that I've got any experience of, but I think some of the above might be answered by the Trust itself, which says on it's website -

Woodford Patient Capital Trust - Championing growth and supporting the best of British

A uniquely attractive investment

• Portfolio exposure to a mix of exciting, disruptive early-stage and early-growth companies, together with some of Woodford’s high conviction mid and large capitalisation ideas
• Buying stakes in businesses with outstanding intellectual property and helping them fulfil their growth potential through the deployment of long-term patient capital
• Aiming to identify the best, untapped growth opportunities and deliver exceptional long-term returns
• An innovative fee structure, aligning manager and investor

The opportunity

• Despite some of the best universities and finest intellectual property, the UK’s record of converting this into commercial success is poor
• This is primarily due to a lack of appropriate capital investment – which creates a compelling investment opportunity
• A long-term ‘patient capital’ approach can deliver extremely successful outcomes and help businesses fulfil their potential, while also helping to develop the UK’s ‘knowledge economy’ and support the much-needed economic rebalancing
• Unrivalled and untapped growth opportunities offer potential for outstanding long-term returns

https://woodfordfunds.com/funds/wpct/

It looks to be very focussed in both geography and investment approach, and wouldn't be something that I'd personally be interested in, but I can see that there may investors that want to get in at the ground floor of some of these types of early-growth stories.

Cheers,

Itsallaguess

[Alaric]

Does anyone see a really strong upside to this trust

It was marketed on the basis of the longer term stock picking abilities of its star name manager. So far it hasn't emulated the success of previous funds he has managed.

The top 10 holdings are shares you probably haven't heard of

Autolus Therapeutics Ltd ADS Each Rep 1 Ord 10.34%
Benevolentai 9.60%
Oxford Nanopore Tech Ord 8.14%
Ih Holdings Int 6.59%
Immunocore Ltd Series 5.37%
Crossco (1337) Plc 3.84%
Oxford Sciences Plc 3.08%
Prothena Corp PLC 2.96%
Ih Holdings International 2.91%
PurpleBricks Group plc Ordinary Shares 1p 2.80%

[Backache]

Just read a piece on WPCT in the Trusts section of Money Observer and I wondered who would buy this trust and why? Not a snide remark at all, I am new to self investing and am just trying to understand what motivates people into certain investments. In this case, returns have been negative (last six months has been positive though) and there is no yield at all. The word "Patient" in the name makes me wonder as well; how patient?

Does anyone see a really strong upside to this trust and what part of a portfolio would this play?

I don't know the full details but it looks more like a Venture Capital type of trust where it is taking equity stakes in early stage companies many of which will fail but you hope to get a few outstanding successes to offset those that fail.
Sitting on a 15% discount is one attraction and having a low correlation to the stock market as a whole is another.

[Quint]

I bought in at launch with a small top up early on, initially was looking at a 20% gain, mainly I think because of all the Woodford hype (yes I believed It too) but I think at that point a lot of people sold out for a quick profit which cause the share price to drop which annoyed Woodford (he even mentioned this in an interview) then it slightly recovered. I sold out and about broke even and put the money into Fundsmith which really did make me some money. Since then WPT dropped further and never did much since.

I think he had a couple of high profile failures quite early on in holdings that were quite a percentage of the trust. This lead people to question how much due diligence had been done.

Woodford did say you needed a long time horizon for this but you would still hope that after three years you would still not be looking at a 20 - 25% loss. Woodford patient capital really did try a lot of investors patience.

I think the lesson for me was not to buy in to a new trust at launch, wait a while and see where it settles. However a lesson it was that I managed to get out without being burned, especially because I only invested a small percentage of my portfolio, my caution was justified.

[OhNoNotimAgain]

It should have been called The Sucker Trust

[Backache]

It should have been called The Sucker Trust

Looking at it, I don't really agree with this.
It kind of implies that the management have taken the investors for a ride. The fee structure is such that so far the management have been paid no fees and will not receive any unless the trust does very well.
It accesses the kind of early stage small companies that is very difficult for the small investor to access at reasonable cost. It is meant to be a long term investment and so far it has not been successful equally in NAV terms it has not fallen. It is a high risk vehicle but as part of a balance portfolio it certainly doesn't look like it's just for suckers.

[EssDeeAitch]

Just read a piece on WPCT in the Trusts section of Money Observer and I wondered who would buy this trust and why? Not a snide remark at all, I am new to self investing and am just trying to understand what motivates people into certain investments. In this case, returns have been negative (last six months has been positive though) and there is no yield at all. The word "Patient" in the name makes me wonder as well; how patient?

Does anyone see a really strong upside to this trust and what part of a portfolio would this play?

I don't know the full details but it looks more like a Venture Capital type of trust where it is taking equity stakes in early stage companies many of which will fail but you hope to get a few outstanding successes to offset those that fail.
Sitting on a 15% discount is one attraction and having a low correlation to the stock market as a whole is another.

I think you have it here with likening it to a VCT. @Itsallaguess reproduced some stuff from WCPT which included, "Buying stakes in businesses with outstanding intellectual property and helping them fulfill their growth potential through the deployment of long-term patient capital".

Here is hoping that investors patience is rewarded but more patience may be needed.

[OhNoNotimAgain]

It should have been called The Sucker Trust

Looking at it, I don't really agree with this.
It kind of implies that the management have taken the investors for a ride. The fee structure is such that so far the management have been paid no fees and will not receive any unless the trust does very well.
It accesses the kind of early stage small companies that is very difficult for the small investor to access at reasonable cost. It is meant to be a long term investment and so far it has not been successful equally in NAV terms it has not fallen. It is a high risk vehicle but as part of a balance portfolio it certainly doesn't look like it's just for suckers.

Yep.

And I doubt very much if it is costing Woodford to run your money, he will find ways to charge, you just won't see it.

Early stage investing is high risk and is not suitable for the vast majority of investors. Woodford has persauaded people to give him the money to play the game so he is happy. He may get a few successes in which case he can capitilise on that by being involved in future funding at advantageous terms, but whether investors in the fund benefit as well is a different matter.

[OhNoNotimAgain]

Just read a piece on WPCT in the Trusts section of Money Observer and I wondered who would buy this trust and why? Not a snide remark at all, I am new to self investing and am just trying to understand what motivates people into certain investments. In this case, returns have been negative (last six months has been positive though) and there is no yield at all. The word "Patient" in the name makes me wonder as well; how patient?

Does anyone see a really strong upside to this trust and what part of a portfolio would this play?

I don't know the full details but it looks more like a Venture Capital type of trust where it is taking equity stakes in early stage companies many of which will fail but you hope to get a few outstanding successes to offset those that fail.
Sitting on a 15% discount is one attraction and having a low correlation to the stock market as a whole is another.

I think you have it here with likening it to a VCT. @Itsallaguess reproduced some stuff from WCPT which included, "Buying stakes in businesses with outstanding intellectual property and helping them fulfill their growth potential through the deployment of long-term patient capital".

Here is hoping that investors patience is rewarded but more patience may be needed.

Every fund manager's dream is for investors to give them money, not ask any awkward questions and not demand it back for a very long time.

They lose out on the opportunity cost of their money and he benefits from the free use of theirs.

[StOmer]

Picked this up on a double digit discount in September, up a shade under 10% in a few weeks but see this as a speculative long term (patient) hold. For the portfolio I see this as part of my UK allocation but as a satellite holding of 5%, the lack of dividend makes it suitable to hold outside the ISA if need be.

[Backache]

Yep.

And I doubt very much if it is costing Woodford to run your money, he will find ways to charge, you just won't see it.

Early stage investing is high risk and is not suitable for the vast majority of investors. Woodford has persauaded people to give him the money to play the game so he is happy. He may get a few successes in which case he can capitilise on that by being involved in future funding at advantageous terms, but whether investors in the fund benefit as well is a different matter.

Firstly I said there were no fees not no costs involved. All investment has some cost, even trackers attract fees though they are often low.
You were talking about suckers the only point of having a sucker is taking them for money which this trust clearly has not done so far no fees have been payable to them.
Secondly you say that early stage investing is not suitable for the majority of investors, well the majority of investors have not bought this trust But is early stage investing suitable for some investors . Historically returns have been greater for venture capital than for the secondary market the risk is obviously greatest the more concentrated the money. In this case it is spread across quite a few companies thus reducing it a bit.It is also not correlated to the market as a whole.
Having a small proportion of ones portfolio in a non correlated high risk potentially high return vehicle can reduce the overall risk of ones portfolio.
I still fail to see why this should be for 'suckers'

[Quint]

Moderator Message:
referenced quote deleted at request of poster.

Looks like you played it right. I was still at the lower end of a steep learning curve.

[scotia]

I still fail to see why this should be for 'suckers'

In some respects it was the Fund Managers who were the suckers. Woodford made his name with large cap Tobacco and Pharmaceuticals. There is a world of difference between that background and a knowledge of high tech start up companies. I was astonished when I learned that Woodford had invested in a Cold Fusion company - anyone with a modest scientific knowledge would have known that this was snake oil territory. What came to mind was the quotation attributed to Patrick Moore (in a different context) that a certain person didn't know the difference between an asteroid and an adenoid.

[OhNoNotimAgain]

Yep.

And I doubt very much if it is costing Woodford to run your money, he will find ways to charge, you just won't see it.

Early stage investing is high risk and is not suitable for the vast majority of investors. Woodford has persauaded people to give him the money to play the game so he is happy. He may get a few successes in which case he can capitilise on that by being involved in future funding at advantageous terms, but whether investors in the fund benefit as well is a different matter.

Firstly I said there were no fees not no costs involved. All investment has some cost, even trackers attract fees though they are often low.
You were talking about suckers the only point of having a sucker is taking them for money which this trust clearly has not done so far no fees have been payable to them.
Secondly you say that early stage investing is not suitable for the majority of investors, well the majority of investors have not bought this trust But is early stage investing suitable for some investors . Historically returns have been greater for venture capital than for the secondary market the risk is obviously greatest the more concentrated the money. In this case it is spread across quite a few companies thus reducing it a bit.It is also not correlated to the market as a whole.
Having a small proportion of ones portfolio in a non correlated high risk potentially high return vehicle can reduce the overall risk of ones portfolio.
I still fail to see why this should be for 'suckers'

Read "When Genius Failed" the story of Long-Term capital management

https://www.amazon.co.uk/When-Genius-Fa ... 1841155047

In a bear market all assets migrate to a correlation of 1 as investors sell whatever they can to raise cash.

Illiquid assets, like Start-Ups, suffer more than most because what few buyers there are just take their money off the table. Liquid markets, like listed equities, suffer much less because there is always a buyer.

Despite what Gordon Brown says the economic cycle has not been abolished, it is just a long time, 10 years, since we had a corrrection.

[Backache]

Read "When Genius Failed" the story of Long-Term capital management

https://www.amazon.co.uk/When-Genius-Fa ... 1841155047

In a bear market all assets migrate to a correlation of 1 as investors sell whatever they can to raise cash.

Illiquid assets, like Start-Ups, suffer more than most because what few buyers there are just take their money off the table. Liquid markets, like listed equities, suffer much less because there is always a buyer.

Despite what Gordon Brown says the economic cycle has not been abolished, it is just a long time, 10 years, since we had a corrrection.

I've read the book.
A couple of observations it isn't actually true that all assets migrate to correlation of 1 , in the last bear market government bonds did very well.

I've never suggested that the economic cycle is not with us and that bear markets won't happen again.
If the trust was to do worse than the market as a whole in a downturn but still be worthwhile it would imply the correlation was not 1 and it may be a time to buy. Equally bear markets are not always about market panic and a downturn for the fortunes of the largest companies does not necessarily imply that small companies will follow suit.

[Itsallaguess]

Despite what Gordon Brown says the economic cycle has not been abolished, it is just a long time, 10 years, since we had a correction.

I think you'll find that it's actually less than 10 weeks since we had a FTSE correction, and that was the second one that the FTSE has had in the past 12 months....

Telegraph - 11th October 2018 -

The FTSE 100 slumped into correction territory yesterday as the stock market sell-off sparked by fears of rising interest rates in the US spread around the globe.

Britain’s blue-chip FTSE 100 index had tumbled 1.9pc to close at 7,006.9 as London took its cue from Wall Street to hit a fresh six-month low.

It is the ­index’s second correction of 2018 – a fall of more than 10pc from an index’s 52-week high.

https://www.telegraph.co.uk/business/2018/10/11/wall-street-sell-off-pushes-ftse-100-correction/

Cheers,

Itsallaguess

[UncleEbenezer]

I think you have it here with likening it to a VCT. @Itsallaguess reproduced some stuff from WCPT which included, "Buying stakes in businesses with outstanding intellectual property and helping them fulfill their growth potential through the deployment of long-term patient capital".

The VCT-like argument presents a Good Reason for creating a new fund in that niche. Not only is it working without the strict and sometimes arcane rules governing VCTs (in exchange for their tax breaks), the recent VCT rule changes disqualified many profitable investments from VCTs, leaving them in search of alternative funds.

But I'd be looking to invest with fund managers with a track record in such companies - many of them the same companies who manage VCT funds. Not a man who made his name by taking advantage of investment classes whose prices were held down by their exclusion from ethical investors.

[Hariseldon58]

Woodford Patient Capital is a more attractive investment now, then it was at launch......

Woodford is hugely out of favour at present but who knows...

[Itsallaguess]

Woodford Patient Capital is a more attractive investment now, than it was at launch......

I must admit to initially misreading your statement above, and thinking that you said 'lunch', was about to reply that it does seem to be that kind of market at the moment.....



Cheers,

Itsallaguess