The Woodford Patient Capital Trust (LON:WPCT) has just released its annual results for 2018. It was a mixed year for the fund’s holdings. Although the NAV was up by a steady 6.9%, sentiment remains firmly against it, with the shares falling a further 2.8%.
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WPCT aims to achieve long-term capital growth by investing in a diversified portfolio with a focus on UK companies, both quoted and unquoted. Despite this, its top ten holdings account for almost 60% of the assets and given the early stage nature of these businesses it is perhaps not surprising that the results were largely driven by just three of these names.
Cancer treatment company Autolus Therapeutics (NAS:AUTL) listed on NASDAQ at the top end of its price range in June 2018 and by the end of the year its shares were trading substantially above the issue price after releasing positive clinical data in December.
Significant positive revaluation
The fund’s largest holding, Industrial Heat, also experienced a significant positive revaluation after making further progress and is expecting to reach a major milestone in the year ahead. It has built a platform of new energy technologies that could provide more efficient sources of energy, although there is a lot of scepticism around this whole area.
Unfortunately, the gains from these two stocks were partly offset by the fall in the value of Prothena following disappointing results from a clinical trial in April 2018.
Manager Neil Woodford has said that he is pleased with the operational progress being delivered by the majority of companies in the portfolio, but it is fair to say that it was a mixed year with 20 of the unquoted holdings revalued upwards, 16 downwards and 18 unchanged. These represented two-thirds of the year-end portfolio valuation, so the winners need to more than make up for the losers if WPCT is ever going to achieve its stated objective.
Return of more than 10% per annum
The fund aims to deliver a return of more than 10% per annum over the longer term, but it has yet to prove it can manage anything like this. Between the launch in April 2015 and the end of February 2019, the NAV was down 4%, with the shares trading 16% lower than the issue price.
It has been a lacklustre four years for investors, although some tangible progress has been made, with more of the underlying companies now in the commercialisation phase and others expected to hit key milestones in the years ahead. A good example is the gene analysis company Oxford Nanopore, which has recently announced that it plans to list on the stock market within the next 12 months.
Woodford has had a difficult few years and it remains to be seen whether he can turn things around, but it is the sort of fund where a few high profile success stories can make a huge difference. If the likes of Oxford Nanopore achieve a buoyant IPO the 15% discount to NAV would quickly narrow.