We’ve benefited from some good news this week in respect of one of our holdings in the Growth portfolio, called Schroder UK Public Private Trust. This holding has had a troubled past and it is a good example of a couple of risks in our industry that are not very often discussed; reputation and career risks, together with short-termism. Schroder UK Public Private Trust started its life as Woodford Patient Capital Trust and the mere mention of ‘Woodford’ gets a lot of people very angry.
Before I go onto reputation risk and career risk, I want to provide a brief history for Schroder UK Public Private Trust (called SUPP) as it’s important to my story. It was launched by Neil Woodford in 2015, raising £800m to invest mainly in healthcare and biotechnology names, predominately in the UK. Neil Woodford was one of the UK’s best investors and had produced stellar returns for decades, so his new investment trust was well received. Despite a rise of nearly 20% within the first six months, the trust struggled and by the time Schroders were appointed to replace Mr Woodford in October 2019, the share price had fallen by just short of 70%. In December 2019, the Woodford Patient Capital Trust was renamed Schroder UK Public Private Trust (SUPP).
When we started our business in April 2020, SUPP was one of the first investments we made. The share price was hovering between 20-25p with a net asset value of around 50p. This was an asset that nobody wanted to own. I could understand why and this is where reputation and career risks come in.
The asset had fallen very sharply and was still tarnished with the Woodford name. I was told by a few brokers that I was foolish and several clients questioned it too. If I was employed at a large investment manager, bank or wealth manager, there would be very little chance that I would want to or be allowed to invest in SUPP. It’s just fraught with too much ‘risk’ and ‘danger’. It’s far easier to buy something that everyone else is buying and if it goes wrong, you’re wrong with everyone else and you won’t get sacked for that. In investment management, you don’t want to look stupid in front of clients or your boss and you don’t want to underperform the benchmarks, so it’s easier to avoid things like SUPP, which has the potential to do both.
However, if you did some work on SUPP and look at the portfolio and the new management team, you might have come to a realisation that it is far too cheap. I had no idea if the share price would recover over the next few weeks, months or years, however I knew that if we were patient, we would be rewarded. Patience is not a thing that our industry is blessed with.
So, back to this week and as I write, SUPP’s share price is 38p. This is despite the official net asset value of the trust not really moving. It has however benefited from some good management from Schroders and a number of positive results from the holdings, such as Oxford Nanopore this week and Kymab in January, amongst others.
I’m glad that we had the ability and willingness to buy SUPP for clients and I’m glad that the board of the trust didn’t follow the example of Link, who decided to wind up the open-ended version of Woodford’s strategy, the Equity Income fund. I feel very sorry for those clients who had investments in the fund. The good news from Oxford Nanopore this week should’ve valued the Equity Income’s holdings at around £234m. Instead, the holding was sold for £20.7m last summer by Link.
Link didn’t want to be attached to the faltering reputation of Mr Woodford and used liquidity excuses, combined with media pressure to succumb and enforce a terrible decision to wind up the fund (M&G’s Property fund is still suspended after nearly 18 months but this isn’t being wound up?). I know that Link are being taken to court over their handing of the debacle. Link’s reputation has taken a nose-dive, yet it’s mainly Mr Woodford who receives the brunt of negativity from the media.
We remain optimistic for SUPP and it remains too cheap, even at 38p a share and we’re glad that we have the opportunity to continue to invest in the trust.
The above should not be seen as providing advice. Investments can rise and fall in value and capital is at risk. It is recommended to seek professional advice before considering any investment.
Thanks for reading and