Woodford Patient Capital Trust

Thrugelmir

Plus wrote: »

Which is why it's very surprising that he invested in Industrial Heat. IH is a company that claims to have invented Cold Fusion (ie nuclear fusion reactions at temperatures of a few hundred degrees, not millions of degrees like the Sun), and is in the process of commercialising the technology. But they have not demonstrated that cold fusion actually exists, a field which is full of snake oil and driven by 'true believers'. There is little due diligence that can be done because there is basically no justification as to why it is possible within our current understanding of the laws of physics (or where our model of those laws might be incorrect).

Mr Woodford might be a true believer, but this is not the kind of investment a mainstream fund should go anywhere near.

Must point out that this isn't a fund I've followed or invested in. Currently the investment in IH amounts to 0.04% of the total portfolio. Similar to a fair number of early stage companies that have been invested in. Given that this in part the focus of the fund. Whether it's mainstream or not is irrelevant. As investors should understand what are investing in before doing so. If uncertain, seek advice or simply pass. Instead looking elsewhere.

Plus

Thrugelmir wrote: »

Must point out that this isn't a fund I've followed or invested in. Currently the investment in IH amounts to 0.04% of the total portfolio.

31 October data:
Industrial Heat (unquoted) 0.88%
Industrial Heat A2 Pref (unquoted) 0.51%
Industrial Heat A3 Pref (unquoted) 0.04%
Total: 1.43% of fund

Of an £800m fund (as it was at launch) that's £11.4m. Combined, it's number 21 when the holdings are ranked in descending order of weight.

Voyager2002

Of course, it is possible that the equipment that gives the (illusory) appearance of cold fusion might be doing something else that is of commercial value. Even so, 11 million in IH is somewhat puzzling...

digannio

Woodford (between his various funds) was said to have around £530m in Prothena... 30% of the stock. Would be difficult getting out of that in a hurry if he needs to.

bostonerimus

Plus wrote: »

Which is why it's very surprising that he invested in Industrial Heat. IH is a company that claims to have invented Cold Fusion (ie nuclear fusion reactions at temperatures of a few hundred degrees, not millions of degrees like the Sun), and is in the process of commercialising the technology.

As a PhD physicist (not pharmacologist) I'll borrow Malthusian's words and say that cold fusion is a load of "Horlicks".......maybe the fund should be renamed the Mental Patient Trust.

Eco_Miser

bostonerimus wrote: »

As a physicist I'd like to point out that the laws don't change, it's our understanding of them that changes.

Physics doesn't change; the so called laws that we use to describe physics do, as our understanding changes.

bostonerimus

Physics doesn't change

Try telling that to a physicist in the early 1900s.

Physics changes as our understanding changes. Physics, and all sciences, must be in continual flux.

Eco_Miser

You're the one who said

bostonerimus wrote: »

As a physicist I'd like to point out that the laws don't change, it's our understanding of them that changes.

The laws are merely verbal or mathematical expressions of our understanding, and change every time someone has a breakthrough in understanding, as happened around 1900.
The actual physical reality never changes. The science being taught, studied, experimented on does change.

bostonerimus

Eco_Miser wrote: »

You're the one who said

The laws are merely verbal or mathematical expressions of our understanding, and change every time someone has a breakthrough in understanding, as happened around 1900.
The actual physical reality never changes. The science being taught, studied, experimented on does change.

I think you are mis-interpreting what I meant by "laws". The theories (referred to as scientific laws as in Newton's Three) will always be changing. But the underlying basic principals, the laws of nature, are not assumed to be changing and it is those that we seek to discover and explain. I expected my meaning to be clear from the context and I apologize for not being clearer. Of course there are physicists, cosmologists and philosophers that postulate the evolution of the "laws of nature" or that they are different in different places, but I'm not a theoretical physicist and that's way beyond my pay grade.

Plus

With apologies for starting the tangent, we now return to your scheduled programme.

Malthusian wrote: »

The "Patient Capital" label is utter Horlicks. You knew it was flim-flam when the Chancellor of the Exchequer started using it.

It seems to be based on the idea that venture capital firms make their money by investing in acorns and waiting patiently for them to grow into oak trees. But venture capital firms are in reality the least patient investors in existence. All they care about is achieving an exit - selling their promising firm to a larger rival (e.g. Instagram to Facebook), selling it to the public market via IPO, or failing that, selling it to a greater fool in another VC.

There is an argument that this doesn't fit some industries. If it's an industry where little investment is required (eg mobile apps) then we're talking Dragon's Den type investment - VC walks in with £1m, turns the screws on the management, and hopes to exit when the company is sold for £10m.

But some are very slow and capital intensive. Take Gigaclear (a holding of WPCT). They install rural fibre broadband. A big upfront cost, and then a slower return. The return on investment for a customer is maybe 10-20 years. If the VC wants an exit, who are they going to sell to? BT or Virgin won't be interested (doesn't fit their existing infrastructure). Anyone buying it is going to be investing for the yield, not for capital appreciation - more an infrastructure fund than another industry player.

At other times, investment money can help the company scale to become larger, rather than be bought. For instance, I'm sure GM or Toyota might have paid a few million for Tesla back in the day. The technology probably would have got put into a few niche products and then mostly ignored. It is only because the investors were not so quick to head for the exit that Tesla is the scale it is today. (Whether it will be able to maintain its independence in the face of manufacturing problems is another story).

Some of the drug discovery companies Mr Woodford has invested in are like that - going through trials and certification is very capital intensive. But the problem is they are also extremely risky: if the drug fails a trial, you don't have slightly lower returns you have nothing at all. That's not patient capital, it's patient roulette.