Neil Woodford launches record £800m investment company
Woodford Investment Management has launched the biggest ever UK investment company, successfully raising £800 million by the time the Woodford Patient Capital Trust launched on the London Stock Exchange on 21 April 2015.
The trust - noted for its unique fee structure, which only pays the managers when the trust outperforms by a certain margin - was oversubscribed despite its limit initially being just £200 million.
On 10 April 2015 Woodford said he was increasing the size of the launch from £200 million to £800 million to reflect investor demand.
The interest is no surprise, given that the vehicle comes from the firm created by star fund manager Neil Woodford, who managed the outperforming Invesco Perpetual Income and High Income funds until leaving to set up his own firm in April 2014.
The launch breaks the previous record of £549 million set in 1994 by Mercury European Privatisation. The largest non-UK launch - debt fund Prodesse, based in the Channel Islands – raised £1.479 billion in 2005.
Strong track record
Ian Sayers, chief executive of the Association of Investment Companies, says: "It's a testament to the investment company sector that this distinctive company is taking advantage of the benefits of the closed-ended structure, such as the ability to invest in specialist, small, less liquid assets."
Woodford Patient Capital opened trading at 100p per share at 8am on Tuesday 21 April 2015, shooting to an early premium of 5.9% before settling at 102.5p per share (a 2.5% premium) by mid-morning.
Commenting on the trust's listing, Numis Securities says: "We expect the fund to trade well in the near term given Neil Woodford's strong track record and the high profile of the vehicle. Furthermore, we expect the fund to be eligible for inclusion in the FTSE All Share as a FTSE 250 constituent in June, which will lead to buying by index trackers.
"The fund has a large pool of capital given its focus on early-stage companies, and its progress against its investment timetable will be followed closely given the increase in size. [However] we believe it stands a good chance of faring better than previous ‘blockbuster’ investment trust IPOs that have often failed to meet the inflated expectations of retail investors."
This article was written for our sister website Money Observer
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.