Wellcome Trust says economic ‘rollercoaster’ behind drop in investment returns

10 Jan 2020 News

The Wellcome Trust has said that its investment returns for its 2018-19 financial year were lower than recent years due to “a rollercoaster ride in global financial markets”.

In its annual report the charity said investment returns for the year were 6.9 per cent. This compares with 13.4 per cent for the previous year.

“The 2018-19 financial year was a turbulent period,” the charity said in its accounts. “Politics in the US, UK and elsewhere was hugely divisive and the global economy exhibited clear signs of slowing. While consumer spending and labour markets have so far held up, there have been signs of a recession in global manufacturing, especially in the motor vehicle industrial complex, partly caused by simmering trade tensions.”

The report adds that the “the persistence of ultra-low interest rates has helped global equity markets hold up reasonably well” until the fourth quarter of 2018. This quarter, which is the first quarter of the charity’s financial year, was the “weakest quarter for global equities since Q3 2011”. It added that “against this backdrop”, the lower rate of return was “unsurprising”.

At end of the 2018-19 financial year the total value of the portfolio, which is managed by an in-house team of investment professionals, stood at £26.8bn.

Over the past ten years its investment portfolio has made a real return after inflation of 184 per cent, or 9.8 per cent annually in real terms.

However, the charity does not expect to see a return to higher returns any time soon, stating that it does not “expect the investment environment to get any easier for the foreseeable future”. As a result, it is “actively planning for a lower return environment and focusing on ensuring that Wellcome has adequate liquidity for the foreseeable future”.

Income from grants, programme-related investment activity and the Wellcome Collection was £73m, which compares with £46m for the previous year.

Expenditure also increased from £638m to £1.13bn. It said this was mainly due to “the timing of significant commitments as 2018 was a year with no renewals (which typically cover funding for five years) or major one-off commitments”.

It added that it expects its expenditure to exceed £1bn per year for the next five years.

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