The good news for investors in the Woodford Patient Capital Trust (WPCT) is that Schroders are taking over management of the portfolio. The share price promptly jumped upwards on the news (up about 29% at the time of writing), but speculators need to be wary. Although the trust is still at a large discount to the Net Asset Value, I looked at the portfolio yesterday and was not impressed.
These are the top ten holdings by value: Rutherford Health, Benevolent AI, Atom Bank, Oxford Nanopore, Industrial Heat, Immunocore A Pref, Kymab B Pref, Mission Therapeutics, Ratesetter and Autolus. There may be some value in there but actually judging it, or confirming it, is far from easy.
One issue not raised in the recent BBC Panorama programme on Woodford was that of the naming of the Woodford Equity Income Fund. Such funds typically focus on paying high dividends to investors and to do so they invest in high dividend paying companies. They therefore tend to hold boring large cap companies. But the Woodford fund, which is now being wound up, was very different. It did have some high dividend paying holdings in the fund but not necessarily large cap ones and it also had a number of early stage companies that were unlisted. This was not a typical “Equity Income” fund. Investors might feel they were misled in that regard by the name.
For a more typical “equity income” fund, look at City of London Investment Trust (CTY) who are holding their Annual General Meeting today at 2.30 pm. You may be able to watch the AGM on-line, or see a recording later, by going to https://www.janushenderson.com/en-gb/investor/ . Their top ten holdings at the year end were: Shell, HSBC, Diageo, BP, Unilever, Prudential, Lloyds Bank, RELX, BAT and Rio Tinto.
But these were the top ten holdings in the Woodford Equity Income Fund: Barratt Developments, Burford Capital, Taylor Wimpey, Benevolent Ai, Provident Financial, Theravance Biopharma, Countryside Properties, Oxford Nanopore, Ip Group and Raven Property Convertible Pref 6.5%. That’s a very different kind of portfolio.
The AIC definition of an equity income fund primarily says that typically the company will have a yield on the underlying portfolio ranging between 110% and 175% of that of an All-Share Index (World or UK). It says nothing about the riskiness of the companies being invested in nor their size when income investors are typically looking for security of income. Surely the definition of an equity income fund needs revisiting and more information provided to investors. The latter is of course now taking place as new direct investors have to confirm they have read the KID on the fund when doing so on-line but do they read them and understand them?
Postscript: The broadcast on-line video of the City of London IT AGM as definitely promised in the notice of the meeting could not be found when required and after contacting Janus Henderson I am still awaiting a call back 24 hours later to tell me where a recording might be. This is really not good enough.
Postscript 2 (4 days later): A recording of the presentation by Job Curtis at the City of London AGM and the business of the meeting is present here: https://www.janushenderson.com/en-gb/investor/investment-trusts-live/ .
As regards Woodford Patient Capital Trust, it has been pointed out to me that one aspect I did not mention and which might affect an investors view of the valuation was the high level of debt in the company. The gearing has grown as some equity holdings were disposed of and this may be another problem for Schroders.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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