The newly-created Woodford Patient Capital Trust will only charge investors in a year when they receive a positive return over a certain figure, although shareholders in the new fund may have to pay a small annual charge to cover costs such as auditing. There will be no annual management charges, saving investors around 0.75 per cent a year compared to typical open-ended funds and unit trusts.

The only income Woodford Investment Management will receive will be a performance fee, paid in shares; the firm argues this arrangement aligns the interests of managers with shareholders.

Details of the fees and the absolute return target will be revealed in a prospectus published later this month. Trading in the shares on the London Stock Exchange will start by mid-April.

The fund’s portfolio will have two segments; three quarters of shareholders’ money will be invested in early stage, quoted and unquoted companies in the UK and US; the other quarter will purchase shares in blue chip companies, dividends from which will subsidise the running of the fund.

“This is something I’ve wanted to do for a very long time,” Woodford said, explaining the new fund would give him free-rein to back early-stage biotechnology and medical science companies.

Woodford has invested in this type of company for 20 years and in unquoted companies for a decade.

“Britain has had a fantastic record of invention and innovation for centuries,” he continued, “but we have been very poor at capturing and commercialising this innovation. There has been a very sad lack of long-term patient capital in this space. It is my belief that commercial success for intellectual property requires the application of patient capital.”

Industry reaction was mixed. “Neil Woodford has an impressive track record of supporting new fledgling companies, and nurturing them to success with his long term investment approach,” said Mark Dampier, head of research at Hargreaves Landsdown. “This new Investment Trust will allow him greater freedom to uncover the great companies of tomorrow.”

Adrian Lowcock, head of investing at Axa Wealth, said Woodford “stood out as an exceptional manager”, praising him for “investing for the longer term, ignoring the noise that can often dominate short term stock market performance”.

However, Lowcock went on to advise that investors approach with caution. “Investors should think before they invest. Woodford himself makes it clear this is only suitable for long term investors…this trust is not likely to generate an income, in the short term at least.”

“It is a different type of investment to the funds to which Woodford made his name – equity income. Investors need ask themselves, does this fund meet their appetite for risk and are they able to invest for the long term.  This fund should be considered riskier than other smaller companies funds because it will invest significantly in unquoted investments.”