Friday Letter Management, not mayhem

The Wellcome Trust’s move to rebalance its portfolio reminds that not all limited partner actions in these turbulent times signal distress.

The Wellcome Trust, one of Europe’s most highly regarded investors in alternatives, grabbed headlines this week when it said it would put up some £3.8 billion in private equity fund interests for sale in the secondary market.

That figures, you might say. The need for liquidity resulting from the credit crisis is pushing increasing numbers of institutional investors to offload limited partner commitments. However, Wellcome has said that, in fact, that’s not really its motivation.

Instead, the initiative was characterised by Danny Truell, the £15 billion charity’s chief investment officer, as a bid to rejuvenate its portfolio and capitalise on the US dollar’s rising strength against the British pound.

And across the pond, deputy Peter Pereira Gray took pains to stress that if Wellcome’s fund positions don’t manage to fetch an appropriate price, they won’t be sold. Furthermore, Pereira Gray told delegates at the PERE Forum in New York that Wellcome was just as keen to augment its private equity portfolio, particularly by buying assets in the direct secondary market.

“This is asset management,” Pereira Gray said. He added that the medical research-focused Wellcome has more than $2 billion in its coffers to sponsor operations, research funding and fund investment and characterised its private equity investments as having always provided “substantial performance”.

His words squashed speculation that Wellcome’s private equity programme was lacking liquidity to fund capital calls or make new commitments – let alone rethinking its allegiance to the asset class altogether.

It is a very welcome reminder that not all institutional investors are plagued by cash flow problems, and continue to view private equity assets as a prize in their portfolio.