Thursday 24 October 2019 9:53 am

Schroders to take charge of Woodford Patient Capital Trust

Schroders will take charge of the embattled Woodford Patient Capital Trust (WPCT) after former star stockpicker Neil Woodford’s abrupt departure last week.

Shares in WPCT surged over 28 per cent in morning trading following the news.

Read more: DEBATE: Can Neil Woodford’s reputation ever recover?

Woodford’s fall from grace was cemented last week when he quit WPCT and closed his investment company after administrators closed his flagship Equity Income Fund (WEIF).

WPCT’s share price has sunk 60 per cent since May with Woodford at the helm, and the trust had announced in July in was in talks with other managers to replace him.

Chairman Susan Searle announced this morning that Schroders would be put in charge of the fund.

“Following a competitive process, we are delighted to be appointing Schroders as the company’s portfolio manager,” she said.

“Its careful and considered long-term approach to investment, backed by its substantial research resources in both public and private assets, makes it the natural choice to manage the company’s portfolio.”

WPCT will now be renamed as Schroder UK Public Private Trust.

“I would like to thank our shareholders for their support throughout this process as we have worked to put in place the right portfolio manager against the background of challenging circumstances,” Searle added.

“Throughout the process, the board has had a clear focus on achieving an outcome that protects and enhances long-term shareholder value and we believe Schroders is best placed to deliver this.”

Read more: Let’s take a closer look at Neil Woodford’s dubious investments

Schroders will take a management fee of one per cent per year based on the trust’s market capitalisation, up to £600m, and 0.8 per cent a year after that.

Schroders will also charge a performance fee from 2023 valued at 15 per cent of any excess returns above a net asset value share of 77p.

“Schroders have clearly got a challenge on their hands to sort out the holdings in the trust,” said AJ Bell chief investment officer Kevin Doran.

“There is likely to be a long period of realignment where the manager looks to determine which assets to keep and which to sell and even then, a buyer will have to be found for the assets they wish to dispose of. This is likely to be a long process and will incur transaction costs for investors.”
“The payment of a management and performance fee more akin to a hedge fund may irk anyone initially attracted to the trust by the original charging structure, but for the rest, the opportunity to draw a line under the Woodford situation and move on will be, no doubt welcome,” Doran said.

It was announced earlier this month that WEIF would be shut down. The fund had been frozen in June in the face of a wave of investor withdrawals.

Administrator Link said it had been unable to sell off Woodford’s unlisted assets and therefore could not guarantee that the fund could be reopened.

Had the fund thawed, redemptions could well have reached a level that would be almost impossible to manage, analysts said.

The financial watchdog has denied claims it pressurised Link to close the flagship £3bn fund.

The Financial Conduct Authority (FCA) dismissed reports in the Sunday Times that it had pressed Link to shutter the fund to protect the investment industry’s reputation “categorically untrue”.

Read more: Regulator denies pressuring administrator to close Woodford’s flagship fund

FCA head Andrew Bailey had earlier accused Woodford of “following the letter, but not the spirit” of rules governing liquidity.

Woodford’s investments in illiquid assets, particularly biotech firms, meant the fund could not meet redemption requests. Despite the fund being shuttered, Woodford continued to charge investors a management fee.