Wellcome Trust’s Holdings Gained 18% on Private Equity

The Wellcome Trust, the world’s second-biggest medical charity, said its investments returned 18 percent in the year ended Sept. 30, aided by more exposure to stocks and private equity since 2008.

Investments in those areas and in venture capital, hedge funds and residential property all recorded gains of 15 percent to 20 percent, Chairman William Castell said in the trust’s annual report published today. The five biggest stock investments in the 16.4 billion-pound ($26.8 billion) endowment were Marks & Spencer Group Plc, Vodafone Group Plc, HSBC Holdings Plc, Toyota Motor Corp. and Apple Inc.

“Having significantly increased our exposure to public and private equity holdings in the years 2008 to 2011, when many investors had become risk-averse, we have reaped the rewards in the last two years as they have again embraced risk assets,” Castell said in the report.

The London-based trust spent 726 million pounds on its charitable activities in the period, most of it in grants to medical research in the U.K. The five biggest recipients were the Francis Crick Institute, University of Oxford, University of Cambridge, University College London and Imperial College London.

Next Decade

The charity has a policy of committing 4.7 percent of the three-year weighted average of investment asset value to its annual budget, according to the report. Over the next five years, it plans to donate more than 3.7 billion pounds.

The trust targets a return of at least 4.5 percent a year after adjusting for inflation, Chief Investment Officer Danny Truell said in an interview. It has posted a nominal return of 10 percent a year for the past 10 years and probably won’t be able to sustain that rate in the next decade, Truell said.

“It’s going to be a stretch,” Truell said in a telephone interview. “But we will do our best.”

In the 2012-2013 year the trust made a gain of more than $100 million when AstraZeneca Plc’s MedImmune unit acquired Amplimmune, a biotechnology company focused on cancer immunotherapy in which the trust was an early backer. It made an additional $100 million in profit from its 1 percent stake in Twitter Inc. when that company, whose service allows users to post 140-character updates to followers, held an initial public offering, Truell said.

Return Rate

The return rate for the year was also helped by the charity having no investments in bonds or commodities, he said.

“Both nominal and real bond yields are too low and we’re unlikely to change our stance” on bonds, he said. “There may be more interesting opportunities in commodities.”

Property accounted for about 10 percent of the trust’s total portfolio, including about 1 billion pounds of London real estate that it owns, mostly in Kensington residential units whose value has risen sharply in the past decade. The trust expects that growth to slow in coming years, Truell said.

The trust was established in 1936 under the terms of the will of Henry S. Wellcome, co-founder of Burroughs Wellcome & Co., a forerunner of GlaxoSmithKline Plc. It helped fund the Human Genome Project and is providing 120 million pounds toward the construction of the Crick Institute, a science research center in London. Among medical research charities, the trust’s endowment is exceeded only by that of the Bill & Melinda Gates Foundation in Seattle.

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