Wellcome Trust announces 2010/11 annual results

2010/11 was another challenging year for economies and financial markets. Having advanced almost 20% between October 2010 and May 2011, stock markets stalled and then sold off sharply in the last quarter of our financial year. Fears grew about the cohesion of the Euro, the pace of the US recovery and the impact of inflationary pressures on faster-growing economies, notably China.

In these circumstances, we were pleased that our investment portfolio recorded a total return of 2%, equating to almost £270 million on a portfolio value of £13.9 billion at the start of the year.

We have returned a total of 19% (annualised 6%) over three years and 24% (annualised 4%) over five years to September 2011. Since the inception of our investment portfolio in 1985, it has provided a total return averaging almost 14% a year.

These returns enabled us to spend £602 million this year in support of our mission and also supported our AAA rating, with our investment asset base ending the year at £13.6 billion. They also should enable us to spend a projected amount in excess of £3 billion on our charitable activities between 2011 and 2016, a 29% increase over the previous five-year period.

Positive returns over the year from each element of the 56% of our portfolio held in private equity, venture capital, hedge funds and property more than offset lower stock markets.

Our buyout investments have returned 12% over the past year and 66% over the past five years, outperforming public markets by almost 9% a year. The net annual internal rate of return from our private equity portfolio since inception in 1994 now stands at 15%, driven by excellent returns on growth and venture investments. Our property assets returned 13% in 2010/11 and 22% over the past five years, driven by total returns from our direct residential property at 70% and our direct commercial property, which has delivered 60%.

Our public equity returns were minus 5% for the year. Over three and five years, public equities have delivered 7% and 3% per annum respectively, each representing an outperformance of the MSCI World Index by at least 1.0% per annum. Our hedge funds delivered a total return of 5% for the year and 10% and 8% over three and five years respectively.

Sir William Castell, Chairman of the Trust, said: "I am pleased to report a steady performance from our investment portfolio in a year when stock markets recorded negative returns. This will enable us to give record amounts to medical research at a time when economic headwinds remain strong."

Danny Truell, CIO of the Trust, added: "Good market timing and strong investment performance from illiquid assets has again helped in 2010/11. Long-term themes will continue to inform our choice of investments; we expect to generate substantial free cash-flows over the next five years. In such uncertain economic times, we count it an advantage to work with only very broad asset allocation constraints. With a talented investment team and a robust long-term investment philosophy, we believe that we are well positioned for the future."