Woodford not paid by investors in his Patient Capital Trust
Neil Woodford will not be paid by investors in his Patient Capital Trust after stock market turbulence dented the fund performance of Britain’s best-known asset manager last year.
The trust, which launched in April 2015 with an innovative fee structure that only charges investors if it performs strongly, lost 11.8 per cent over the past 11 months.
The fund additionally does not charge investors an annual management fee, in contrast to most other investment products.
A spokesperson for Woodford Investment Management confirmed that there would be “no performance fee charge” for investors for 2015. The trust mainly specialises in early-stage investment opportunities and the performance fee is set at 15 per cent for any gains over 10 per cent.
Andrew Clare, who holds the chair in asset management at Cass Business School, said: “[Mr Woodford’s] investors will be comforted a little to know that he is suffering with them. Normally for managers it’s ‘tails I win and heads I win too’.”
Investors only pay 0.1 per cent to cover costs such as custody and depositary fees. “The firm doesn’t get a penny from it [the 0.1 per cent fee],” said the spokesperson.
Despite receiving no money for almost a year’s worth of work, the fund house said it has no plans to change the fee structure on the trust.
“The rationale for the fee structure remains very much intact. It aligns the fund manager and investor, reflecting the conviction Woodford has in this uniquely attractive long-term investment opportunity,” the company said.
Martin Bamford, managing director of Informed Choice, an independent financial adviser, said Mr Woodford is betting that he will win back any revenue losses over time.
“No doubt Mr Woodford has a reasonable expectation he will eventually earn higher fees than the conventional fee structure would have allowed.”
Patient Capital has been hit by a series of problems since launch, including controversy over its investment in a US biotech company that has been accused of financial misconduct.
Last year, Mr Woodford attempted to get a former FBI agent on to the board of Northwest Biotherapeutics, which had seen its share price fall by almost half in just three months.
Patient Capital has shrunk from £800m when it launched in 2015 to about £714m today, while its net asset value is down 13.2 per cent over the past six months.
Laith Khalaf, senior analyst at Hargreaves Lansdown, a fund supermarket, said: “[Mr Woodford] would have wanted a better start for the fund, but the past 12 months have not been kind to share prices.”
However, Darius McDermott, managing director of Chelsea Financial Services, a fund supermarket, said he did not think investors would be spooked. “One year of bad performance should not be any issue whatsoever for longer-term investors,” he added.
The lack of revenues from Patient Capital will be offset by Mr Woodford’s flagship fund, the £8.28bn Woodford Equity Income product, which does charge an annual management fee.
“[Mr Woodford and his team] are helped out by the fact that the Woodford Equity Income fund does charge an annual fee and which can keep the wheels turning until such time as things turn around for the Patient Capital Trust,” said Mr Khalaf.
Mr McDermott agreed: “There are plenty of fees being earned across the group to allow them to have this interesting fee structure.”