Performance of Woodford Patient Capital, the investment trust run by star fund manager Neil Woodford, has picked up over the last three months and Mr Woodford is optimistic it will continue.
When the Woodford Patient Capital trust launched in April 2015, with the aim of investing in a mix of early-stage and early-growth companies, alongside larger companies listed on the London Stock Exchange, it attracted a large group of investors thanks to the reputation of Mr Woodford. But for the first two years the trust’s performance disappointed and its discount widened.
Over the last three months, however, performance has picked up and the trust returned 10.6%.
Announcing Woodford Patient Capital’s half-yearly results last week, Mr Woodford said: "I remain very confident that this portfolio will deliver the attractive double-digit annualised returns that we set out to deliver."
At launch, Mr Woodford had originally targeted returns of 10% plus. He backed this conviction by putting in place a "no win, no fee" charging structure.
With this fee model, the trust charges an annual performance fee of 15% of any excess returns over 10% which is its target cumulative annual return. When the target is missed, investors will not pay a performance fee.
Addressing investors, Mr Woodford previously acknowledged that 2016 was a challenging year, but was keen to stress the long-term strategy of the trust.
The trust invests in early-stage and unquoted companies, 87% of which are in the UK. The largest contribution in the first half of this year came from online estate agency business Purplebricks.
It is the second largest holding in the portfolio at 10.9%, and in the first half of this year, shares in Purplebricks more than trebled in price.
Mr Woodford said the business "successfully executed their ambitious plans to dominate the UK’s nascent online estate agency industry, while at the same time, significantly disrupt the traditional estate agency model".
Prothena is another large holding in the portfolio with 14.3%. It’s a US-based biotechnology company focused on discovering, developing and commercialising therapies directed specifically at disease-causing proteins.
Meanwhile, shares in 4D Pharma declined, "despite continued positive progress in the development of its live biotherapeutic therapies," says Mr Woodford.
"Similarly, ReNeuron also declined, despite the fact that the company announced very positive data in its stroke trial. In each of these instances, we remain very attracted to a long-term commercial opportunity that is being substantially overlooked by the market."
Previously, Mr Woodford had argued that he could see the fundamental progress the businesses in his fund were delivering and that it was only a matter of time before this was reflected in valuations.
He concludes: "It is pleasing that this has started to come through in terms of performance but the best is yet to come, in my view."
This article was originally published on our sister website Money Observer.