Friday, April 1, 2011

The charity that excels as a fund manager

I’ve just received the Wellcome Trust annual review for 2010. It makes good reading. It also offers an important insight into the activities of a large philanthropic organisation.

Money talks, of course, and the Wellcome Trust has lots of it. It was founded after the death of Henry Wellcome, the driving force behind the growth of a multi-national pharmaceutical company which initially bore his name but which has since been absorbed into the giant pharma multinational, GlaxoSmithKline. Mr. Wellcome bequeathed the means to establish the trust in his will. It funds biomedical research. It makes money available for such things as seeking a cure for cancer, understanding Parkinson’s disease, Alzheimer’s disease and motor neuron disease, sequencing the human genome, and the impacts of climate change on human health. Most importantly, it also has, as a core activity, efforts aimed at the public understanding of science. This means that one does not have to be a research fellow to benefit from the Wellcome Trust – it makes high-quality educational material available free to any member of the public that requests it. Teachers can order educational packs which include both teacher and pupil instructional resources. All this can be done online at

Up to recently the main focus of its activities has been in the UK. However, last September (2010) the trust announced that it had formed a biomedical research partnership with Science Foundation Ireland and the Health Research Board of Ireland.

Apart from the research it is involved in at present, which is detailed in the annual review and which can be downloaded here, one of the most interesting aspects of the Wellcome Trust is the way it has maintained the flow of funding that allows it to carry out its activities. The review says:

"Over the past 25 years we have been able to increase the nominal value of our charitable expenditure from £20 million a year to more than £600 million a year because our financial investments over the period have given a return of more than 2700 per cent.

At 30 September 2010, our investments were valued at £13.91 billion. Over the year, we enjoyed a return of 11 per cent, equivalent to £1.45 bn, as returns recovered to an all-time high despite the financial crisis".

The cumulative net returns on its portfolio since 1986 relative to inflation (CPI +6%) and the MSCI stock market index of 1500 global stocks, from 24 countries of the developed world, are as shown on the graph above, which is also from the annual review.

All told this is an impressive performance, particularly in the light of the recent meltdown in various economies around the world. The Wellcome Trust seems to be an excellent fund manager as well as being a funding powerhouse for scientific research.

The Wellcome Trust is not without its critics nor, indeed, should it be above criticism. One Brian Deer, an investigative journalist working for the Sunday Times, carried out a study of the background of Henry Wellcome himself, the company he founded and the links between the pharma industry and the Wellcome Trust. At one stage he suggested that practitioners who aspired to carrying out research and who were in a position to promote the Wellcome company’s products, did so with at least an implicit understanding that they would be funded by the trust. Mr. Deer’s writings, with links to relevant articles, are to be found here.

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