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WPCT – Not more investment policy rule bending, Neil, surely?

By Cynical Bear | Friday 8 June 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

I’ve always thought it odd when investment vehicles merely take stakes in other investment funds as one ends up with duplication of fees. There is usually an investment policy limit on such stakes, not that Mr Woodford appears to be taking the limit at Woodford Patient Capital Trust (WPCT) that seriously. Why would he - rules are for the great unwashed aren’t they?

WPCT’s investment policy states that there is a limit of a 10% of net assets to be invested in investment funds as at the time of investment. Accordingly, it may go above that figure due to growth in particular investments but WPCT cannot make new investments when above that level. When scanning through the detritus in WPCT’s portfolio, there appeared to be a significant number of such funds so thought I’d draw up a list and see what it totalled.

Clearly, there may be some definitional get-out for Mr Woodford but I have added a short description to the investment so people can make up their own mind. In order of size and percentage of NAV from 30 April portfolio listing in brackets;

Oxford Sciences innovation (4.04%) – this is one of the largest investment vehicles focussed on Oxford spin-outs, backed by the great and the goods trust it qualifies 

Ombu (2.83%) – Since February, the ever-so-transparent WPCT has made it difficult to calculate this holding by splitting it out into various different preference share holdings in five separate lines in the portfolio. Probably for the best as it looks a bit of a basket case but nevertheless, its website shows that it has invested in seven different “greentech” companies

Arix Bioscience (1.82%) – No arguments here as Arix is a biotech/tech investment trust and is a co-shareholder in the ‘shortly-to-be-listed-on-Nasdaq-perhaps’ Autolus

Malin (1.69%) – Dublin-listed healthcare investment vehicle; its largest position being one of WPCT’s too, namely Immunocore. Don’t worry everyone, I’m sure that funding round will happen shortly!

Mercia Technologies (0.83%) – Listed tech investment business

Literacy Capital (0.73%) – Relatively recent new VC type investment, presumably as a favour to Paul Pindar as it is run by a family member

Accelerated Digital Ventures (0.5%) – As it sounds, a tech venture vehicle

Cambridge Innovation Capital (0.3%) – Tech investor focussed on Cambridge

I will give it the benefit of doubt with the Dementia Discovery Fund and ABLS Capital and not treat them as investment funds but I still make that 12.74% and the Literacy Capital investment is very new so the argument that no investment has been made above 10% doesn’t fly.

I presume Woodford has persuaded whoever needs to be persuaded that one of those 8 investments above isn’t actually an investment fund within the meaning of the policy but not sure which one and it hardly feels within the spirit of the policy, not that that has worried Neil Woodford before. I look forward to the tweak to the policy so that it covers gross assets rather than net assets in the coming weeks to help the situation – not that the fund manager will tell anyone!

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