It has already been confirmed that the FE Alpha Manager (pictured) will launch a fund in the same mould as his five crown-rated Invesco Perpetual High Income portfolio in May, but Dampier says Woodford’s genuine interest in nurturing start-up companies will result in another launch very shortly.
When asked if he expected Woodford to launch any more funds at Woodford Investment Manager – which will be powered by Oakley Capital – Dampier said:
“Something in private equity without a doubt, but not until the autumn time. He’s got a passion for this area, and so I think he’ll definitely run something with unquoted companies in there.” “He asked me about it recently and we discussed that it would have to be a closed-ended structure. With the sort of companies he’d be investing in – those that he’s essentially financing – you can’t cope with money coming in and out.”
“Based on the conversations I’ve had with him, I’m 99.9 per cent sure that a private equity launch will happen. The question is whether or not it happens in autumn, or whether they wait a while until the business is a little more settled.”
Dampier doubts whether Woodford will use a VCT structure, as his holding period is much too long.
“VCTs are too restrictive,” he said. “They look at early exits because investors want a return on their cash. VCTs nurture companies up to a certain point, but Neil is looking to take the companies all the way through and prevent them from being IPO-ed.”
“I’d expect an investment trust structure. There are already a few that invest directly into private equity, but these tend to take a 10-year view. Neil takes more like a 15-year view.”
Although the manager has never run private equity vehicles in the retail space, he invested in a number of unquoted companies in his Invesco Perpetual High Income and Income portfolios.
He has a particular interest in the biotech sector, and among his favourites in recent years are Circassia, which develops treatments for allergies, and Oxford Nanopore, which specialises in the analysis of single molecules.
Stephen Peters, head of investment trust research at Charles Stanley Direct, says he wouldn’t be surprised if Woodford launched a private equity trust.
“Closed-ended is absolutely the appropriate structure to run a mandate such as this,” he said. “There are obvious questions regarding where his time will be spent, and which type of fund would suffer as a result, but it’s certainly interesting.”
He says the two biggest players in the private equity investment trust space at the moment are HG Capital IT and Electra IT.
“They’ve done a good job for shareholders in recent years, but both are on the expensive side,” he added.
Electra IT is currently on a slight premium, while HG Capital is on a discount of 8 per cent.
Woodford is one of the highest-rated fund managers in the world, let alone the UK. Although he has lagged behind his peers during the last five years of rising markets, his long-term record is very strong.
Performance of manager vs peers since Jan 2000
Source: FE Analytics
As well as running the two income funds, he was formerly co-manager of Invesco Perpetual Distribution and Invesco Perpetual Monthly Income Plus, as well as Edinburgh IT.
FE Alpha Manager Mark Barnett took over the running of the Invesco Perpetual Income and High Income funds last week, a month earlier than it was said he would. Woodford is due to end his employment with Invesco Perpetual at the end of the month.
Oakley Capital was unavailable for comment.
