Private Equity Boosts Wellcome’s 2018 Returns

The star asset class’ 20.2% gains raises Trust’s value to $38.4 billion.

Wellcome Trust, the UK’s largest charitable foundation, posted a 13.4% return on its investments for 2018, growing its assets to $38.4 billion.

Although this year’s 11.6% asset rewards were not as high as 2017’s 16.9% return, falling short due to sagging European and emerging market equities, the bioresearch charity’s top-performing asset was private equity, which raked in 20.2% gains. The PE harvest, which included standouts of 50.1% returns from private co-investments and 32% returns from venture capital funds, helped bring its five- and 10-year results to 14% and 11.7%, respectively.

Despite these returns, the firm warned in its annual report that the private equity party might not last as the space’s long-term performance has “attracted significant flows of new capital into the asset class, with the result that there is now an unprecedented amount of uncalled funds in the industry waiting to be deployed. ” This means competition for deals has risen, making entry prices more costly.

“Expectations for future returns are therefore more muted than those we have been enjoying in recent years,” the report said.

As for other assets, hedge funds returned 10.5%, public equities gained 9.9%, and real estate (a combination of property and infrastructure) returned 5.9%. Cash and bond returns were not disclosed.

As of the September-ending period, the foundation’s asset mix was 52% stocks, 24.2% private equity, 9.3% hedge funds, 8.5% real estate, and 4.7% cash and bonds.

With 2018 behind it, Wellcome expects a combination of “slowing, but still positive, growth and higher interest rates” to make the equity and other risk asset “backdrop” more difficult in the near future. Despite continuing volatility, the firm is still “somewhat comfortable” about the environment.

“Our reaction to a more volatile backdrop, especially since the end of the financial year, has been to focus on the cash flow generation potential of the assets we own, and the overall liquidity profile of the portfolio,” the organization’s trustees said in the report, adding that portfolio turnover is still very limited.

“Well-run companies, disciplined investment partnerships, and cash generative assets should do well even in a more unpredictable environment,” said the trustees.

Tags: , , , ,