Introducing the Woodford Patient Capital Trust plc

Posted by Jason Chapman in Fund and industry updates category on 22 Apr 15


Introducing the Woodford Patient Capital Trust plc

I am delighted to announce that Neil Woodford's long awaited Patient Capital Trust is now available to invest in via the Willis Owen platform.  This newly launched investment trust offers investors the opportunity to benefit from the long-term growth of an innovative and expertly-managed mix of high conviction blue-chip ideas, plus greater exposure to early-stage and early-growth companies.

Investment Objective:

To achieve long-term capital growth through investing in a portfolio consisting predominantly of UK companies, both quoted and unquoted. The Company will aim to deliver a return in excess of 10% per annum over the longer term. This is a target only and not a profit forecast and there can be no assurance that it will be met. You should note that capital is at risk with this investment

Investment Policy:

Initially, the portfolio is expected to be dominated by mid- and large-cap listed, mature companies that offer growth opportunities. It may also have an allocation to cash, pending investment in early-stage and early-growth companies. Over time the exposure to listed, early-stage and early-growth companies will gradually build towards an anticipated portfolio consisting of:

  • c. 25% invested in mid/large listed mature companies
  • c. 25% invested in early-growth companies (typically quoted but may be unquoted)
  • c. 50% invested in early-stage companies (quoted and unquoted)

Understanding the risks:

  • It is vital that investors understand the risks
  • Young businesses have a different risk profile to mature blue-chip companies, however – risks are much more stock-specific, which implies a lower correlation with equity markets and the wider economy
  • This may offer diversification benefits
  • Long-term outcomes are more binary – extremely attractive rewards for success but some businesses will inevitably fail to fulfil their potential and this may expose investors to the risk of capital losses
  • They aim to mitigate this risk through rigorous analysis of the opportunity, an unwavering focus on valuation and diversification across a larger number of smaller positions

Geographic exposure:

At least 70% invested in companies traded on the London Stock Exchange or incorporated in the UK.

Number of holdings:

Initially 50-100 companies, potentially more as portfolio matures.

Dividend policy:

Strategy will be focused on long-term capital growth, so significant dividends are unlikely once portfolio is mature.

Gearing policy:

Investment trusts can borrow to buy investments if the manager expects stock markets to rise. This is known as ‘gearing’ and the idea is to make a greater return on the money borrowed than the cost of the borrowing. If markets rise, gearing can improve the trust’s profits but, if they fall, losses will be greater.

The Woodford Patient Capital Trust may employ gearing of up to 20% of net asset value for capital flexibility but does not intend to deploy long-term gearing.

Annual management fee:

Woodford Investment Management will not receive an annual management fee.

A performance fee will be received equal to 15% of any excess returns over a 10% cumulative hurdle rate per annum, subject to a high watermark.

Ongoing annual expenses not expected to exceed 0.35% per annum of IPO gross proceeds.

Formation / initial expenses not expected to exceed 1.5%.

Defining early-stage investments

Typically pre-revenue, pre-profit with significant milestones still to overcome in order to fulfil their potential. Typical characteristics include:

  • Strong intellectual property to ensure barriers to entry once commercialised
  • Board and management team consisting of founders, innovators and entrepreneurs
  • Low valuations reflecting stage of development and accompanying risks
  • Several future funding rounds to be anticipated as the business progresses
  • Risks are more stock-specific, implying lower correlation with wider markets and economy
  • May be quoted or unquoted

Defining early-growth investments

Have overcome some earlier challenges having achieved commercial breakthroughs and are now starting to penetrate target markets. Typical characteristics include:

  • Strong intellectual property and technology as barrier to entry
  • Board and management team reflecting broader mix of founders and new executive hires
  • Higher valuations reflect de-risking but do not yet fully capture long-term growth potential
  • External funding now mainly required for growth and execution
  • Risks becoming less binary and more correlated with wider markets and economy
  • Likely to be quoted but may be unquoted

Important Documents:

Further Information:

  • If you would like further information regarding investment trusts click here.
  • If you would like further information regarding the Willis Owen Platform click here.
  • Investment trusts are traded like shares and are charged at our normal online rate of £7.50.

Steps to applying now for the Woodford Patient Capital Trust:

  • Choose your product in which you wish to hold the Woodford Patient Capital Trust e.g. ISA, SIPP
  • Apply or login to the WO Platform
  • If you wish to transfer from an existing investment held outside of the Willis Owen Platform, you will need to open an account ISA/SIPP and select the transfer option.  This will provide you with the relevant application form to arrange the transfer.

Important information:

This communication regarding the Woodford Patient Capital Trust does not constituent a recommendation that this product is a suitable investment for you. Willis Owen is communicating that this product is now available, and any decision to invest is taken by the investor alone. If you are unsure of the suitability you should seek professional financial advice from a suitably qualified adviser.

You should note that your capital is at risk with this investment and you may get back less than you invested. The value of the trust as well as any income it pays will fluctuate, which may partly be the result of exchange rate changes. The price of shares in the trust is determined by market supply and demand. The share price may be different to the net asset value of the trust. The purpose of this blog is to provide summary information regarding the Woodford Patient Capital Trust plc. You should read the Prospectus before investing.  

Apply now

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