Wednesday 2 October 2019 6:23 pm

Woodford Patient Capital Trust accused of stretching rules on unquoted holdings

The biggest holding in Neil Woodford’s Patient Capital Trust (WPCT) is listed on an obscure stock exchange where its shares have only been traded once since it listed in February, it has emerged.

Investec analysts have questioned whether Rutherford Health should be treated as a listed holding by WPCT, given that its shares have only changed hands once in a transaction worth £355 in the eight months since the company floated on the NEX exchange.

Read more: Neil Woodford’s role at risk as listed fund suffers £232m loss

Investec’s Alan Brierley told City A.M. Rutherford’s listed status could be considered “a little bit cosmetic” given its lack of liquidity.


It emerged in interim results published earlier this week that WPCT was close to breaching its 80 per cent limit on unquoted holdings. On 31 August, WPCT’s portfolio was 79.77 per cent unquoted holdings.

Investec analysts estimate Rutherford – which specialises in proton beam therapy, represents 15.5 per cent of WPCT’s net asset value (NAV) – meaning that were the holding to be recategorised as unquoted, the trust would be in breach of its own limit.

WPCT said in its results document it was planning to seek shareholders’ permission to raise the limit.

Brierley said it was normal for a listed stock to have “at least some sort of liquidity”. “In this case, I can’t think of any stock that would have traded less,” he added.

“Technically it is listed on an exchange, but to all intents and purposes it just never ever trades,” said Brierley.

The NEX exchange is a cheaper option for small firms than listing on London’s alternative AIM exchange, and carries a lighter regulatory burden. Unlike AIM, NEX is not part of the London Stock Exchange.

Brierley advised WPCT investors to sell their holdings in a note published earlier this week, which described restoring trust in the fund “the most herculean of tasks”. Shares in the trust have halved in value this year.


Woodford’s flagship Equity Income Fund (WEIF), which has been suspended since June, also has a 19.5 per cent stake in Rutherford. WEIF was forced to gate after becoming overwhelmed by investor withdrawals, and Woodford has come under criticism for the portfolio’s large proportion of illiquid assets.

Financial Conduct Authority (FCA) boss Andrew Bailey criticised Woodford in July for “following the letter, but not the spirit, of the rules” in the run up to WEIF’s suspension.

Read more: Watchdog calls for clearer investor warnings in wake of Woodford saga

The regulator announced tougher rules for some funds that invest in hard-to-sell assets earlier this week, and said it was considering extending them to the wider fund industry in the wake of the Woodford saga.

Woodford, WPCT, Rutherford, and the FCA declined City A.M.’s requests for comment.

WPCT shares closed just over four per cent down at 43.1p.

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