The Wellcome Trust, which manages a £39.9 billion endowment and is one of the UK’s largest funders of medical research, said it was deliberately holding elevated levels of cash and highly liquid government bonds to prepare for market dislocations.
In its annual report published on Tuesday, the trust warned that global equity valuations particularly in the United States were “at or near all-time highs”, leaving markets vulnerable to sharp corrections.
“Public equity markets look at least fully priced on any metric, and expensive in a longer-term historical context,” the trust said, adding that valuation pressures had spread beyond the US to other regions.
Cash Holdings Far Above Historic Levels
Cash now accounts for 8.9 per cent of Wellcome’s portfolio, well above its historic range of 3 to 5 per cent. This contrasts sharply with the broader asset management industry, where many investors have cut cash holdings to avoid missing out on further stock market gains.
A Bank of America survey last month showed average cash allocations had fallen to a record low of 3.3 per cent.
One prominent outlier is Berkshire Hathaway, the US investment group formerly led by Warren Buffett, which has amassed a $377.5 billion cash reserve around 35 per cent of its market value. Wellcome Trust is itself an investor in Berkshire Hathaway.
“Our natural inclination probably is to be slightly contrarian,” said Fabian Thehos, Wellcome’s co-chief investment officer.
Opportunistic Buying During Market Turmoil
Wellcome said its high cash levels had already allowed it to act opportunistically, revealing that it made profitable share purchases after President Donald Trump’s so-called “liberation day” tariff announcement last April triggered sharp market sell-offs.
The trust reported a total return of 10.2 per cent for the year to September 2025, equivalent to 6.4 per cent in real terms, which it described as “reasonably strong”.
Equity Underperformance and Property Drag
Returns from listed equities reached 10.8 per cent, lagging the global benchmark of 17.4 per cent. The underperformance was largely due to Wellcome’s relatively low exposure to the “Magnificent Seven” US tech giants, which delivered returns of nearly 38 per cent over the period.
During the year, the trust sold £700 million worth of equities, exiting positions in Asian insurer AIA and global brewer Anheuser-Busch.
Property was a notable weak spot, delivering a negative total return of 1.4 per cent. Wellcome owns a substantial portfolio of residential property in London’s South Kensington, where rising rents failed to offset falling house prices.
Preparing for Private Equity Opportunities
Wellcome said it was also holding extra cash to build “dry powder” for future investments in private equity, where it has identified early signs of recovery despite subdued deal activity.
The trust currently holds £14.2 billion in buyout and venture capital investments.
Rising Research Spending and Long-Term Returns
Charitable spending rose to £1.9 billion in the year to September, up from £1.6 billion previously, as Wellcome continued to fund medical and scientific research. The trust said it remains on track to meet its commitment to spend £16 billion on charitable activities by 2032.
It recently pledged £100 million to support the government’s Health Data Research Service, aimed at using anonymised NHS data to improve treatments and accelerate clinical trials.
Founded in 1936 through the will of pharmaceutical entrepreneur Sir Henry Wellcome, the trust has delivered a total return of 14,089 per cent since adopting a diversified investment strategy following Glaxo’s acquisition of Wellcome in 1995 equivalent to an annual real-terms return of 10.3 per cent.
Executive Pay Disclosed
The trust disclosed that its highest-paid investment executive earned £5.06 million in the year, understood to be former chief investment officer Nick Moakes, who retired in March. Julia Gillard, the former Australian prime minister and chair of the trust, was paid £142,000.
