6th February 2015
Veteran fund manager Neil Woodford is to raise £200 million through a new investment trust that will invest in start-up businesses.
The Woodford Patient Capital Trust will be run through his newly-established firm, Woodford Investment Management, and will target returns of ‘in excess of 10% per year over the longer term’.
The long-term aim of the trust will be to invest in unquoted and start-up businesses but in the short-term it will invest in medium and large companies. Investments will then be switched gradually to incorporate smaller companies to meet the objective of ’50-100 holdings with exposure to early-stage and early-growth companies growing over time’.
The trust will invest up to 75% of its assets in listed and unlisted smaller companies.
The trust will not have a management fee but it will have a performance fee. Although the size of the performance fee has not been revealed until the publication of the trust’s prospectus it will not be paid in cash. Shares equal to the amount of the fee will be created meaning managers will become larger shareholders if the trust is successful.
Woodford is no stranger to small, fledgling businesses as he has been investing in this type of firm for more than a decade an have made up a number of investments in his CF Woodford Equity Income fund, through which he has backed online bank Atom and estate agency Purplebricks.com.
Woodford said he believe small businesses represent ‘significant untapped’ opportunity. However, he said in the UK there was an unwillingness to nurture great ideas into long-term commercial success, with the biggest hurdle being appropriate capital.
‘Patient capital is the missing component for many companies and the reason why great innovation hasn’t translated into commercial success for the UK economy,’ he said.
‘Patient capital investors work closely with early-stage businesses and help nurture them to achieve commercial success. It takes involvement, flexibility and above all, it takes time.’
The prospectus for the trust will be launched later this month and shares for the trust will be listed in April.
Mark Dampier, head of research at Hargreaves Lansdown, said: ‘Neil Woodford has an impressive track record of supporting new fledgling companies, and nurturing them to success with his long-term investment approach.
‘He already holds some within the CF Woodford Equity Income fund, and this new investment trust will allow him greater freedom to uncover the great companies of tomorrow. Those investors who wish to invest in this fund should similarly take a long term view, by which I mean at least 10 years, and should make sure they study the prospectus carefully before investing.’