Woodford Patient Capital shoots to premium

The Woodford Patient Capital Trust successfully raised £800 million in advance of it launching on the London Stock Exchange on Tuesday, after which it began trading at an instant share price to net aset value (NAV) premium.

Woodford Investment Management announced on 10 April it was increasing the size of the launch from £200 million (with an unofficial ceiling of £500 million) to £800 million.

The trust - noted for its unique fee structure, which only pays the managers when the trust outperforms by a certain margin - was oversubscribed despite the increased limit.

However Craig Newman, chief executive of Woodford Investment Management, insisted that subcriptions were scaled back by less than 10%.

Balancing act

Newman says: "We have always wanted to minimise the chances of scaling back applications [but] investor appetite was not the only factor we and the board had to consider; it was very much a balancing act between the amount of capital raised and the trust's investment rationale and remit."

"We needed to select an appropriate figure well within the level needed to manage the investment strategy and deploy capital in the one to two-year period outlined in the original prospectus. The board, in close consultation with Neil and his team, concluded that £800 million was the optimum figure."

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.

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 share price to net asset value (NAV) premium high 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 is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.