Patient Capital

[shetland]

The price is now 55p, a discount of 36.5% on the latest net asset valuation of 86.69p At what point does it become a buy bearing in mind that at least 40 p of the NAV is in quoted assets. Are we really saying that the unquoted element is not worth 15p per share ?

[SalvorHardin]

The price is now 55p, a discount of 36.5% on the latest net asset valuation of 86.69p At what point does it become a buy bearing in mind that at least 40 p of the NAV is in quoted assets. Are we really saying that the unquoted element is not worth 15p per share ?

Not necessarily. For one thing it's likely that the quoted assets are worth less in practice because of the risk that the Woodford Equity Income Fund has to start dumping its more liquid quoted holdings in order to meet redemptions. Patient Capital holds a lot of shares in companies that Woodford Equity Income Fund also holds, as noted in the article below, and in this scenario the share price falls from the fund's distressed sales will reduce Patient Capital's NAV. So the easiest way for the market to allow for this risk is to widen the discount to NAV.

https://citywire.co.uk/investment-trust ... d/a1236022

I've just had a look at the most recent annual report for Patient Capital. As of 31st December 2018 the split was 65% unquoted and 35% quoted. You'd normally expect to see an investment trust with a majority of unquoted investments to trade at a fairly large discount to its NAV. Something like 15% to 20% would not be unusual in normal times.

One question that many investors are going to have is: has Patient Capital been used to prop up Woodford Equity Income by buying quite a bit of its unquoted portfolio? I'd apply a bit more discount to allow for this; there are going to be issues in calculating the price for these sales. It is public knowledge that Woodford Equity Income is a distressed seller, so it would have to accept a lower price than it would normally expect if it was selling to a third party. This is one of the more ruthless things in markets; if buyers know that you are desperate to sell you're not going to get the best price.

Now if I was much younger (and still working), when I had a greater risk tolerance than I have today, I'd be considering Patient Capital as a possible punt

[Alaric]

One question that many investors are going to have is: has Patient Capital been used to prop up Woodford Equity Income by buying quite a bit of its unquoted portfolio?

I think it known that this certainly took place earlier this year by virtue of the IT issuing shares in itself to the OEIC in exchange for a parcel of unquoteds.

It's also been noted that the OEIC holds AIM quoted stocks where there may well be a thin market when a large quantity has to be unloaded.

[Alaric]

It's also been noted that the OEIC holds AIM quoted stocks where there may well be a thin market when a large quantity has to be unloaded.

Here's the article.

https://www.ii.co.uk/analysis-commentar ... s-ii508453

[gbjbaanb]

Now if I was much younger (and still working), when I had a greater risk tolerance than I have today, I'd be considering Patient Capital as a possible punt

I'm considering it, apparently there are several of his unquoted investments that are due to come good next year. I guess his problem was that nobody believed the "patient" bit even though the clue was in the fund name!

But I understand there's a possibility it might all get bought up by some other fund and I don't know what would happen to it then. I doubt it'd be "merged" at any premium to its current price.

[UncleEbenezer]

That's not the half of it. I have seen fund managers participate in IPOs and then, if the issue did well, book them to the institutional accounts and favoured clients. Whereas if it did badly, then dump them into the retail funds where people complain less.

Woodford is wrong to do this but the same kind of games are not unusual at all.

Are you saying the entity participating in an IPO is unclear? That the buyer is [foo asset management] rather than [foo fund]?

Worrying. Does it extend to other kinds of transaction?

[Lootman]

That's not the half of it. I have seen fund managers participate in IPOs and then, if the issue did well, book them to the institutional accounts and favoured clients. Whereas if it did badly, then dump them into the retail funds where people complain less.

Woodford is wrong to do this but the same kind of games are not unusual at all.

Are you saying the entity participating in an IPO is unclear? That the buyer is [foo asset management] rather than [foo fund]?

Worrying. Does it extend to other kinds of transaction?

Yes. A fund manager will typically make one application for shares, and then allocate the resultant block of shares across various different accounts. He/she may have an idea of how to allocate them across those accounts when initially applying, but then change their mind when they actually get the shares, for a variety of reasons, Some individual managers are in charge of dozens of accounts - retail, institutional, private etc.

A bad lot of shares could more easily be disposed of in a large retail fund, because small fundholders typically don't pay as much attention to the details, and don't complain so much.

There's nothing wrong with aggregating or netting any kind of trade, but with most types you know exactly what price you are getting and so there are less opportunities for such games. Some corporate actions may be handled differently as well, depending which accounts are involved e.g. tender offers.

The other messy area I saw is with fund manager costs, which should be attributed to the business, but instead get charged to the retail funds. Since retail have higher charges, a few grand for some service might not get noticed. "Can we get the retail funds to pay for this" was a question I heard a few times.

[richfool]

From today's Guardian:

Block on withdrawals from Neil Woodford fund extended

Investors will remain locked out of Neil Woodford’s flagship fund for at least another month after a block on withdrawals was extended.

https://uk.finance.yahoo.com/news/block ... 22017.html
and
https://www.bbc.co.uk/news/business-48790585

[sackofspuds]

WPCT now at 49p and on a NAV discount of 38.8%.

Quite how the NAV gets calculated when so many of the assets are unquoted is an interesting question.

Anyone else watching it with a view to taking a punt? I can see it going down to mid 40s.

[richfool]

WPCT now at 49p and on a NAV discount of 38.8%.

Quite how the NAV gets calculated when so many of the assets are unquoted is an interesting question.

Anyone else watching it with a view to taking a punt? I can see it going down to mid 40s.

It's a logical thought, but my concern would be that WPCT has been cluttered up with illiquid assets hived off from the OEIC.

[Mike88]

WPCT now at 49p and on a NAV discount of 38.8%.

Quite how the NAV gets calculated when so many of the assets are unquoted is an interesting question.

Anyone else watching it with a view to taking a punt? I can see it going down to mid 40s.

I wouldn't go near it except I hold some bought in the original sale. Many of the assets are possibly overvalued and difficult to sell. If a new manager is appointed many of the assets (or liabilities) might well be disposed of at a knock down price driving the valuation down even further. Keep well away.

I'm hanging on to my small holding as a reminder not to invest in over hyped stocks or so called star managers.

[peka]

Here's some news about two of the stocks owned by Patient Capital:

https://citywire.co.uk/investment-trust ... 104441&utm

[UncleEbenezer]

This is looking a lot like a distressed VCT situation. And indeed, the assets look quite VCT-like, though I've no idea how many would be technically eligible.

The lesson from VCT-land is that a distressed VCT could go either way. A 50% loss and 40% discount could indicate a fill-yer-boots moment if recovery seems likely. Or it could fall a lot further. I'd only be buying if I saw a high likelihood of recovery.

[Avalaugh]

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