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Seneca buys back into fallen Woodford Patient Capital

5 February 2019

Seneca Investment Managers becomes latest trust picker to swing back behind Woodford Patient Capital, arguing its depressed shares do not reflect progress in the portfolio of mostly early-stage healthcare stocks.

Seneca Investment Managers has swung back behind Woodford Patient Capital Trust (WPCT) arguing its depressed share price does not reflect the progress former star fund manager Neil Woodford has made with the portfolio of largely unquoted, early-stage healthcare companies.

The Liverpool-based multi-asset manager revealed it placed small positions in Patient Capital in its Seneca Global Income & Growth (SIGT) investment trust and Seneca Diversified Growth and Seneca Diversified Income open-ended funds.

Seneca said it bought the £707 million trust when its shares traded 16% below net asset value (NAV), suggesting the trade took place in December as markets retrenched over fears of rising US interest rates and a trade war with China.

The discount has since narrowed to 11% giving Seneca an early gain as the shares have rallied from a post-Christmas low of 79.2p to 85p today.

Sentiment towards the trust remains poor, however, with the shares well below the 100p price at which they launched nearly four years ago and their current NAV per share of nearly 97p.

Seneca chief investment officer Peter Elston said the firm invested as ‘we feel the discount to net asset value does not reflect the recent advances demonstrated by underlying early-stage companies within the portfolio’.

This is a change of heart for Seneca, which sold its stake in the trust three years ago claiming that it had been overvalued, making a near 20% profit for its Diversified Growth fund.

Richard Parfect, a fund manager at Seneca, told the Mail on Sunday that the decision to reinvest followed good news from some of the trust’s holdings. This includes Proton Partners International, which is benefiting from wider use of proton beam therapy for cancer patients, as well as DNA sequencing business Oxford Nanopore Technologies and biopharmaceutical group Autolus.

Parfect met Woodford in November and said the huge wave of criticism the manager had endured for the poor three-year performance of his flagship Woodford Equity Income fund as well as Patient Capital was an ‘inevitable result of having been put on a pedestal’.

‘Such swings in emotion create a dislocation between price and value,’ he told the newspaper.

Woodford, the former star manager of Invesco Perpetual's Income and High Income funds and the Edinburgh (EDIN) investment trust, has had a tough time since branching out on his own five years ago.

Last November the trust faced further pressure as Swiss hedge fund manager Lombard Odier started shorting the shares.

However, later that month WPCT announced three ‘significant milestones’ with news of major collaborations by Immunocore, Mission Therapeutics, and Spin Memory – all held by the trust.

Shortly afterwards it received a further boost when Stifel analyst Iain Scouller upgraded the trust to ‘buy’ saying investors had become too gloomy and appeared to have given up on a recovery.

Like Seneca, Scouller had recommended selling WPCT in the months after its launch when enthusiastic investors pushed the shares to a high of 115p before reality and a series of setbacks sent the stock sliding.

Seneca Global Income & Growth is a £79 million trust investing defensively in a mix of mainstream and specialist assets in the UK and overseas. Over five years its share price plus dividends have delivered a total return of 54.9%, ahead of the FTSE All-Share's 33.6% return and its own benchmark of beating inflation by 6% a year but slightly below the 59.1% average of trusts in the AIC Flexible sector.

Its holding in Patient Capital will sit with a number of other investment trusts and companies SIGT uses to gain exposure to specialist markets, such as International Public Partnership (INPP), a listed infrastructure fund, Doric Nimrod Air Two (DNA2) and the recently launched Merian Chrysalis (MERI), which buys stakes in companies expected to float on the stock market. 

Investment company news brought to you by Citywire Financial Publishers Limited.

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