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WPCT board slammed for failure to act independently

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WPCT board slammed for ‘failure to act independently’ in ‘sorry Woodford saga’
David Brenchley, Investment Week, 21 October 2019

Shareholders should be given the chance to have a say on the future of the Woodford Patient Capital trust (WPCT) through a continuation vote, as the board was slammed for failing to act more independently of the manager, according to James Carthew, head of investment company research at QuotedData.

After Link Fund Solutions confirmed on Tuesday (15 October) it had sacked Woodford Investment Management (IM) from the Woodford Equity Income fund (WEIF) and it would be wound up, investment company analysts speculated whether the same would happen with WPCT.

When Woodford IM tendered its resignation as the trust’s manager just hours later, that speculation intensified, with JPMorgan Cazenove suggesting Park Hill could be appointed to oversee the realisations, as they have been for the unquoted stocks in WEIF.

However, Carthew said he thinks “WPCT could have a long life ahead of it”, albeit with heavy emphasis on “could”.

The board has been reviewing Neil Woodford’s role as manager of the trust since WEIF was initially shuttered, with that decision now being fast-tracked and seemingly imminent.

Kieran Drake, research analyst at Winterflood Investment Trusts, said Woodford IM’s resignation answers one of the questions regarding WPCT – that it will need a new manager – but “much uncertainty remains”…

But Carthew said current speculation “misses the point that WPCT is an entirely independent entity from Woodford IM”.

“It always had the ability to hire and fire its managers, change its name and investment objective, and say ‘no’ when Woodford tried to commit it to making overly large investments in dubious companies,” he explained.

“The board’s apparent failure to act more independently of its manager and latterly to fire them is perhaps one of the most regrettable parts of this sorry saga.”

…Currently the trust is at its upper limit when it comes to both gearing, at 20%, and unquoted holdings, at 80%, but a new manager “could take swift action to eliminate the gearing entirely and free up enough cash to cover its running costs for the foreseeable future,” said Carthew.

He thinks shareholders, around a third of which are retail investors, “should be asked by ballot whether they want the company to continue”. “We think a fire sale of the assets is in nobody’s interests,” added Carthew.

“The best course of action might be to identify a core group of investments that have a clear path to profitability and focus on supporting those and exiting the remainder.”

…The WPCT board declined to comment.

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