Star fund manager Neil Woodford is renowned for ploughing his own furrow. Going against the crowd enabled him, during his tenure of the Invesco Perpetual High Income Fund, to turn a £10,000 investment in 1988 into over £230,000 (with income reinvested) by the time he departed.
The master investor’s new venture, the CF Woodford Equity Income Fund, which launches on 2 June, will be managed very much along the same lines. And that means up to 7% of the fund will be in small, early-stage businesses.
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Run-of-the-mill fund managers would consider such investments risky. But Woodford claims he’s had only one disaster in this area in the last 10 years and “many, many” successes.
Brit tech champion
Woodford has a passion for British science. He was quoted in the Guardian as saying:
“No other country matches Britain in its track record of scientific discovery … We do science and innovation incredibly well, but we have a lamentable record in converting top science into top businesses”.
Woodford’s interest in supporting start-up businesses coming out of British universities and research centres isn’t driven by a sentimental patriotism. Rather, he sees himself as being presented with “incredible opportunities”, due to under-funding in the area.
Speaking to What Investment earlier this month, Woodford said:
“While changing [under-funding] is socially useful, I do want a return. I am not in this for totally altruistic reasons. The demand for capital is high, but the supply of capital is very low, and you don’t need more than an O-Level in economics to understand that in those circumstances there is a lot of value to be had for investors”.
3 companies that fit the bill
Tissue Regenix Group (LSE: TRX) was formed in 2006 when it was spun-out from the University of Leeds. The group’s patented regenerative technology enables animal and human tissue to be used to repair diseased or worn out body parts in areas such as vascular disease, heart valve replacement and knee repair.
The AIM-listed group made an operating loss of £6.6m last year, but still has a cash pile of £18.5m to accelerate its commercial roll-out programme.
Imperial Innovations Group (LSE: IVO) was founded in 1986 and listed on AIM in 2006. Imperial is an investment company that provides capital and other assistance for businesses founded on research coming out of Imperial College London, University College London, Cambridge University and Oxford University.
Imperial has interests in over 30 such businesses, focused on therapeutics, medtech and medical devices, engineering, and information & communications technology. The group has a market capitalisation of £395m and net assets of £255m. The book value of 1.5x doesn’t look glaringly expensive given the potential for substantial uplifts in the value of the underlying holdings.
IP Group (LSE: IPO), founded in 2001, is similar to Imperial Innovations, but is rather larger, being a member of the FTSE 250, and having holdings in no fewer than 87 businesses. IP also draws on a much wider range of universities — all across the UK and as far afield as Princeton in the US — but, like Imperial, focuses on techie sectors: energy & renewables, healthcare, biotech, information & communications technology and chemicals & materials.
The group has a market capitalisation of £861m and net assets of £530m. The book value of 1.6x again doesn’t look extortionate.