Henderson, who has also had difficulties with early stage medical discovery companies in the Henderson Opportunities Trust (HOT), said Woodford Patient Capital Trust (WPCT) would recover and the potential of its investments in biotech and emerging healthcare stocks would be realised.
‘I completely agree with some of the things Neil has been saying. There can be quite long periods of time when they [stocks] can be out of favour. Our job is to pick the companies not the share prices,’ he said.
‘It [the trust] will return and people will be happier with the Patient Capital type of investments,’ he predicted.
Henderson’s comments come a week after Woodford attacked the short-seller that has undermined Prothena (PRTA.O), the Irish biotech company that is a top holding in Patient Capital. He also insisted the trust was on ‘the cusp’ of improved performance as its portfolio companies started to achieve important milestones in their development.
Henderson, who recently shared in the pain after a joint holding in IP Group (IPO) was the subject of another short-selling report by J Capital Research, said ironically: ‘I really like it when you read badly researched bear notes on some of them.’
Issued in December, the report accused IP Group of merging with rival technology venture capitalist Touchstone in order to mask problems at Oxford Nanopore, an unlisted company spun out of Oxford university that is attempting to challenge the dominance of Ilumina (ILMN.O) in gene sequencing machines. It is Patient Capital’s largest holding at 9.4% of assets but J Capital claimed its valuation had been inflated by successive rounds of investment by shareholders in IP Group, who wanted its key investment to succeed.
This year IP Group shares, which account for 1% of HOT and 2.4% of the £8.3 billion open-ended Woodford Equity Income fund, have fallen 10% to 128p, extending a decline from their 240p peak in 2015.
Henderson did indicate some differences with Woodford, however. Having seen holdings such as 4D Pharma (DDDD) - which he also shares with Woodford Patient Capital - tumble last year as investors grew impatient with an apparent lack of progress, Henderson said he was looking to delay future investments in medical discovery companies until they were better established.
‘Our timing of purchases could be better,’ he told journalists, indicating he would be cautious about joining early stage investors such as Woodford in future. ‘People pay too much early on. It costs a lot of money and takes a long time to bring a drug to market,’ he said. He added that he would look to confine more investments in the sector when companies had reached their third or fourth round of financing.
The other big difference between Henderson and Woodford currently is performance. Whereas shares in the £690 million Patient Capital trust, which is 60% invested in unquoted, early stage companies, have fallen 17% since launch three years ago; HOT, which has just 7% of its £102 million assets in medical start-ups, has returned over 32% to shareholders over three years.
Performance for the 12 months to the end of November was particularly strong, helped by hot stocks Blue Prism (PRSM), the £895 million robotic automation specialist, and Keyword Studios (KWS), a £902 million services company for computer game developers. Both stocks broadly trebled in value last year, prompting Henderson and co-manager Colin Hughes to take profits. Even so Blue Prism remains the biggest holding in HOT at 4.6% and Keyword is in third place at 3.5%.
In total the diversified portfolio of around 100 stocks generated an underlying net asset value total return of 31.1%. Shareholders received 37.5% as the share price rose faster than the portfolio as investors bought in. This earned Janus Henderson, Henderson’s employer, a performance fee of £900,000 on top of its normal management charge. Following a change, the total combined fee that Janus Henderson can earn is capped at 1.5% of HOT’s assets, although with other costs total ongoing charges borne by the investment trust’s shareholders jumped to 1.9% from 0.94%.
Henderson is a descendant of the family that launched their own fund management group in the 1930s before it went on a series of corporate changes culminating in the merger with Janus Capital Group last year. He also manages the Lowland (LWI) and Law Debenture (LWDB) investment trusts.