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Patient Capital trust considers replacing Woodford, FT reports

12 June 2019

The board of Woodford Patient Capital Trust (WPCT) has held discussions with its broker Winterflood about sacking its fund manager Neil Woodford, according to the Financial Times.

The board of Woodford Patient Capital Trust (WPCT ) has held discussions with its broker Winterflood about sacking its fund manager Neil Woodford (pictured), according to the Financial Times.

The newspaper cites two unidentified people close to the company who say the termination of the contract of Woodford Investment Management (WIM) is an option under consideration.

The sharp fall in the investment trust’s share price in the week since the suspension of the Woodford Equity Income fund and the uncertainty this raises over WPCT’s future and that of WIM have raised the possibility that the board, chaired by Susan Searle, will have to act find a new fund manager.

Being removed as the trust’s fund manager would be a final humiliation for Woodford, a former investment star, who has seen his business crumble last week as wealth manager St James’s Place and financial adviser network Openwork withdrew mandates from him.

Woodford raised a then record £800 million for WPCT four years ago. The trust currently bears his name and is symbolic of the long-term approach he wished to take nurturing Great British start-ups.

His firm is on a three-month notice period and because it charges a pure performance fee, which it has never earned, there is no base annual management fee, making it cheap to remove. However, finding a new manager for the portfolio may be trickier and will certainly be more costly if the remuneration arrangement is changed.

There has been no further statement from the board following its announcement on Monday that it was closely monitoring the situation and was in regular dialogue with Woodford and was also engaging with shareholders and advisers. In its statement it noted the good underlying operational performance of the businesses it had invested in.

Yesterday WPCT shares rallied 7% to 63.4p from an all-time low of 59p after its shares finished Monday on a 31% discount to net asset value (NAV). This followed five days of falls from 76.5p provoked by the gating of the £3.7 billion Woodford Equity Income fund on 3 June. The shares listed at 100p in April 2015.

Investors fear that forced sales by the stricken fund may slash the trust’s NAV and could force it into a downward spiral if the covenant on its banking credit facility is breached. Three quarters of the early-stage and unquoted portfolio overlap with the bigger open-ended fund, although this rises to 89% if the effect of the gearing, or borrowing, is included.

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