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Fund managers lose patience with Woodford's trust

Fund managers at Hawksmoor and Premier have sold their stakes in Woodford Patient Capital as the investment trust continues to struggle.

Fund managers lose patience with Woodford's trust

Fund managers at Hawksmoor Investment Management and Premier Asset Management have sold their stakes in Neil Woodford's Woodford Patient Capital (WPCT) investment trust, as performance continues to lag.

Hawksmoor managers Richard Scott, Daniel Lockyer and Ben Conway sold their £136 million Vanbrugh fund's small stake in the trust as its shares plunged following key holding Prothena's (PRTA.O) failure of a key drug test.

Shares in the trust tumbled 10% on the day the Irish biotech firm announced it was ceasing further research into its key NEOD001 treatment, wiping more than two-thirds off its market value.

Prothena was the trust's biggest holding, accounting for more than 9% of WPCT's assets before the blow.

Hawksmoor said the Prothena blow had validated 'previous concerns about the managers' approach to appropriate position sizing'.

'It was just that the position in Prothena was so big,' said Conway. 'We were uncomfortable with the way the portfolio was constructed with an investment of that size.'

'Usually we don’t mind a manager taking very significant bets as it reflects their conviction. [But] when it’s a stock where there is a clear outcome on the horizon, the outcome of which is binary, is it sensible?'

Hawksmoor had initially been sceptical of the fund when it launched in 2015, raising £800 million, a record-breaking amount for a UK investment trust.

But as the shares drifted from the heady premium during the frenzy surrounding its launch to a discount, the managers saw an opportunity.

They first bought into the trust in February last year at 92p, as the shares traded around 5% below net asset value.

'We thought we would be getting good news through from some of the private equity positions,' said Conway.

After the Prothena news, they sold below that: on the day of the announcement, the shares dropped to 76p, with the discount having widened to more than 7%.

Conway said the team had decided it didn't need to 'take the risk' involved in the concentrated portfolio, which had accounted for less than 1% of their fund.

But he said he wasn't in the camp of those critics who have argued Woodford had 'lost it'.

'I think he gets a lot of stick and it’s completely unjustified,' he said, adding that the rationale for the trust was 'fantastic'.

'I really wish it well because of what it’s trying to do in commercialising UK intellectual property,' he said.

Conway added that the trust could still prove a good investment, particualrly should it deliver positive news from its private equity holdings. 'If I was a private investor with a small stake I wouldn’t be too disheartened,' he added.

Premier Asset Management's multi-asset team meanwhile enjoyed a bit of luck in the timing of the sale of their £214 million Multi-Asset Global Growth fund's stake in the trust.

They began to sell on 19 April, after a sharp rally that had seen the shares rise more than 19% from an all-time low of 71p the previous month to 85p, although still below the 93p level at which they first bought the shares in November last year.

'The trust's price had rebounded from its previous lows, narrowing the discount significantly, making this an ideal time to take profits,' the fund group said in a note.

Premier sold its stake to take part in the initial public offering of Stuart Widdowson's UK small cap investment trust Odyssean (OIT).

The team didn't avoid the Prothena hit entirely, having sold their stake in WPCT between 19 April and 25 April. 

Shares in Woodford Patient Capital have rallied from the lows reached following Prothena's announcement, spurred in part by the initial public offering of its holding Autolus, a London-based cancer specialist. 

But trading at 82p today, they remain down on the 100p price at which they floated more than three years ago. 

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