Investors should continue to back FE Alpha Manager Neil Woodford and his Woodford Patient Capital Trust despite underwhelming performance since its inception, according to several industry experts.
One of the more high-profile trust launches in recent years, the investment company came to market in April 2015 following an oversubscribed share issue.
Looking to invest in privately-owned companies predominantly in the biotechnology and technology sectors, the trust initially raised £800m.
Yet, three years into the venture and investors would have every right to feel disappointed, having lost 19.36 per cent since its inception, as the below chart shows.
Performance of trust vs sector since launch
Source: FE Analytics
With Woodford’s stock selection coming under fire, there has been good news more recently and signs that some of his investments are starting to come though.
Indeed, trial results from medical and scientific research company Hvivo went largely unnoticed but contributed a small boost to his LF Woodford Equity Income fund.
In the Woodford Patient Capital Trust, meanwhile, top 10 holding Autolus had a greater impact on performance.
The blood cancer therapies specialist, which is the eighth-largest holding in the trust, conducted its initial public offering (IPO) in the US raising $150m at $17 per share.
The offering meant that the trust’s stake rose by 51 per cent on the day, providing a 3.8 per cent uplift to the trust’s net asset value (NAV) and is now up 143 per cent since its initial investment.
With signs of positive newsflow for the trust, FE Trustnet asked market commentators whether investors are right to continue to back Woodford Patient Capital, or should have sold out.
Russ Mould, investment director at AJ Bell, said after an intense period of criticism over lacklustre performance, Woodford will likely be feeling more confident now.
“This outcome vindicates Woodford’s approach of finding businesses with ‘outstanding intellectual property’, helping them grow with financial support, and then reaping the rewards with ‘exceptional long-term returns’,” he said.
With 89 holdings in the portfolio, Mould added that the manager is “spreading his net quite wide in the hope of catching other potential Autolus-type situations”.
While it means that these types of successes will have a lesser contribution to the trust than if they were a higher weighting, it also means that any potential blow-ups will have less of an impact to the downside.
Mould noted: “Unfortunately the timing of such valuation uplifts is unpredictable, much to the annoyance of many investors who have perhaps expected the investment trust to keep churning out good news and therefore share price gains.
“Just remember there is a good reason why the product name has ‘patient’ in the title as that is exactly what investors will need to be.”
Sheridan Admans, investment manager at The Share Centre, said he believes the trust remains a strong proposition for investors, noting that his firm holds it in one of its fund-of-funds offerings.
“When you see performance down there is an impact there and you are wondering when things are going to pick up but we have been buying into the portfolio since it was in the late-80p-mark,” Admans said, adding that they were priced-out of the IPO.
“It is great news to see that Autolus and Hvivo came out last week and I think there has been an intimation from Woodford for a while now that he would expect to see things in the portfolio start to gather a bit of momentum.”
Performance of trust vs sector over YTD
Source: FE Analytics
Despite the positive news, there have also been negative headlines recently, with the announcement that trials of top 10 holding Prothena’s leading drug had failed and that the firm would be focusing on other products instead.
“He had a bit of good and bad news with Prothena a month or so ago where we saw a shoot up and then it coming back down on trial news,” Admans said.
But he noted early-stage businesses that are typically “angel-like” often have great ideas and disruptive technologies but take a while to get to market and require a lot of finance.
“When you have a lot of those in the portfolio it is going to take a while for them to all get some traction and now you are starting to see some of those,” he said. 
“I am sure there will be good and bad news looking ahead because that is the nature of running young businesses but I think the next two years are going to be quite interesting. I think those that have hung on, like us, might hopefully be pleased with the outcome.”
However, Shore Financial Planning director Ben Yearsley (pictured) said those that invested at the start should not be surprised with the trust’s performance to-date.
“I do think there is lots of potential value in Woodford Patient Capital Trust and in my view the portfolio has performed as I would have expected it so far for an early stage venture capital style fund,” he said.
“The venture capital J-curve is a common phenomenon with early-stage companies. Often the price dips as more funding is needed prior to a big surge in value when the true potential of those companies is realised.”
Believing this, Yearsley said he added the trust to his self-invested personal pension (SIPP) about a month ago as, despite the bad news and negativity surrounding it, the trust is finally starting to turn.
“I would still be a buyer today at these levels,” he added.
Tony Yousefian, head of investment trust research at FundCalibre, said investors looking to buy-in at these levels should remember that it is a long-term trust and that it may take some time to come good.
“Any investor looking for a quick profit with a short-term time horizon is naturally disappointed and is likely to be so in the future,” he explained. “But bought for the right reasons and in a well-diversified portfolio, it can play an important part [of a broader portfolio] and [is] likely to reward its shareholders handsomely.”