Neil Woodford has urged the government to create a ‘patient capital’ ISA to boost investment in early-stage science and technology companies.
The manager made the call at a House of Lords science and technology committee hearing yesterday, where he was involved in an hour-long panel debate on how the UK can make the most of its knowledge economy.
The panel included Boeing Europe president Michael Arthur and the former chief executive of the Biotechnology and Biological Science Research Council, Jackie Hunter.
Citywire A-rated Woodford was recruited by the government to work on its patient capital review, which was announced in the Autumn Statement.
He has since pointed out that there was evidence many mass affluent investors would back early-stage businesses over the long term if they had appropriate incentives to do so.
In the House of Lords debate, Woodford highlighted why a patient capital ISA could be a compelling proposition.
‘The creation of a new tax wrapper, such as a “patient capital ISA” for example, offering structural tax incentives would encourage the flow of private savings towards those institutional investors that have provided products in this space and then on to the young businesses that need it,’ he said.
Woodford also suggested that inheritance tax taper relief could encourage investors to hold these types of shares for seven- or 10-year minimums.
He accepted that some education would be required around the risks involved in this area, but ultimately if improving flows of capital to early-stage companies increased their probability of success, the long-term risks were likely to be lower than often portrayed.
Woodford estimated an extra £1 billion to £2 billion a year would help early-stage businesses scale up and become British business winners of the future, employing thousands of people in high-wage, high-skilled jobs and generating significant wealth for the UK economy.
Woodford also told the panel the funds industry was too reluctant to take risk. ‘We are too risk-averse as an asset management industry and have spent the last 30 years becoming more risk averse,’ he said.
‘My industry thinks what I do – investing in early stage, illiquid businesses that require patience and lots of engagement is a very extreme minority sport. Very few do it.’
Woodford has been a big supporter of fledgling business through his flagship Woodford Equity Income fund and his £788 million Woodford Patient Capital (WPCT ) investment trust, launched back in April 2015. He also invested heavily in early-stage businesses at his previous employer Invesco Perpetual.
Shares in the Patient Capital trust continue to languish below their £1 price at launch nearly two years ago, trading at 91.1p at a 4% discount to net asset value, having surged to a premium in the first few months of trading.
But it received a boost last week when one of its key holdings Circassia Pharmaceuticals (CIRCI) surged on the back of partnership with drugs giant AstraZeneca (AZN).
Life sciences and technology firm Allied Minds (ALML) is another top stock in the trust, with Woodford pouring another £4 million into the business at the end of last year.
The Woodford Equity Income fund, which recently hit £10 billion, is top of its peer group since launch in June 2014 with a return of 35% versus the sector average of 23%.