Neil Woodford launched the Woodford Patient Capital trust in 2015

Star fund manager Neil Woodford has suffered a torrid time in recent years, as his flagship income fund has failed to deliver and investors have pulled cash out.

The fund manager also runsWoodford Patient Capital trust, an investment trust with a very different objective of investing in exciting early-stage businesses.

It too has suffered and is down 22 per cent since launch.

However, the trust trades at a discount and some investors say that as the name indicates patience is the key and they are backing Woodford to come good. Tony Yarrow, co-portfolio manager at Wise Funds, is one of them and met with Woodford recently.

He explains why he is backing Woodford Patient Capital.

At Wise Funds, we are not afraid to invest in areas which others are avoiding.

The Woodford Patient Capital trust was launched in May 2015, four years ago. There was much about the trust to like the social usefulness of helping new businesses with world-class and often environmentally positive ideas, the super-normal return potential of certain early-stage companies and the generous fee structure where managers dont get paid until returns exceed 15 per cent a year (which hasnt happened yet).

We didnt invest in the early stages, partly because of the over-enthusiasm (as we saw it) of other investors. The fund targeted 500m at launch which was increased to 750m due to the level of demand.

The fund shot to a 20 per cent premium value despite the fact that in those early weeks the fund consisted mostly of uninvested cash.

The optimism of the launch period has turned to a mood of disillusion, helped along by negative stories about the performance of theWoodford Equity Income fund, and challenges at selected Patient Capital holdings such as Purplebricks.

The trust has a strong research team behind it and an unrivalled network of contacts, and quietly behind the scenes has been doing what it was set up to do. Wise Funds first invested early last year when the share price was slightly above 70p, after the trust has slipped to a double-digit discount.

Since its launch in April 2015, Woodford Patient Capital is down 22 per cent, well behind its UK all companies sector average return of 28 per cent

Meanwhile the trusts investments have been advancing, and several of them now appear to be at the inflection point of the J-curve.

At an investor day last week we met the management of Ultrahaptics, a technology which in effect allows you to touch things that arent there, with many evolving uses in advertising, entertainment and the auto industry.

Of particular interest to me was a company called Lignia, developers of a resin which, when injected into soft pinewood, gives it the performance characteristics of hardwood. In the near future doors, windows and the floorboards of yachts will be made out of treated softwood, from trees which have been cut down after 25-35 years, rather than hardwood which has been growing for 120-140 years.

This technology could enable us to terminate the environmentally damaging practice of depleting tropical hardwoods such as teak.

Woodford has come under fire after a disappointing run and investors have jumped ship

We heard from Immunocore, a company which has developed a treatment for cancer in patients where both radiotherapy and chemotherapy have failed. The therapy is now in Stage 3 clinical trial.

Immunocore has attracted an impressive management team, some of whom have moved from much larger companies to work with their cutting-edge science.

It has always been the case that when investing in early stage companies, some will produce spectacular returns, others will give you your money back and one or two will fail. In a well-managed fund, which we believe this one is, the big winners more than pay for the rest.

As Facebook disappears under a mountain of regulation, and Tesla under a heap of debt, tomorrows blockbusters may be closer at hand than you think, right here in the UK. We have been adding to our position.

Woodford Patient Capital top ten holdings (as at 30 April 2019)

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Why were buying Woodford Patient Capital: Wise Funds Tony Yarrow

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