Woodford to invest in more startups & SMEs in key strategy change

Neil Woodford, a former star fund manager at Invesco Perpetual, said that his Woodford Patient Capital Trust would not try to raise any more money from clients after losing 3 per cent of its value.

Instead, it would aim to invest as much as 85 per cent of the trust in emerging companies.

“We are very pleased with the shape of the portfolio,” Mr Woodford said in a recorded message to investors.

“It has taken a bit of a knock in the short term, which has been reflected in the [net asset value] coming down in the short term, but we are very confident about where it will be in the next three to five years.”

A year ago, the Woodford Patient Capital Trust raised £800 million from investors with a promise that it would charge performance fees only if it made an annual return of more than 10 per cent.

Otherwise, adminstration fees are charged at 0.1 per cent of assets under management, well below the industry standard. Shares in the trust were issued at a price of 100p, but closed the year at just below 97½p.

Mr Woodford has developed a reputation as Britain’s answer to Warren Buffett, the famed American investor, and yesterday he was on bullish form defending the fund’s performance: “The market backdrop is difficult at the moment, but this market correction will morph into an intelligent, more discerning market in the next few weeks and months,” he said.

“I think when it does the market will begin to work out that some stocks have gone a lot cheaper and some haven’t.”

The lack of fee income from the trust will not be too big a problem for the Oxford-based fund management business. Aside from the trust, Woodford also runs an £8 billion equity income fund that collects a management fee whether or not it hits a certain performance target.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said that the early performance of the trust was not “a great start”, but noted that it had outperformed the wider UK stock market last year.

Mr Woodford has been no stranger to headlines in recent months. In December, it emerged that his fund had suffered losses of $55 million backing Northwest Biotherapeutics, a cancer treatment company.

The fund manager had invested about $180 million to buy a 28 per cent stake in Northwest before disputed allegations were levelled against it by a little-known investment fund.

Since then, Mr Woodford has called for an independent investigation of the claims and the appointment of a former FBI agent to Northwest’s board.