In January 2020 Nick Moakes, chief investment officer of the Wellcome Trust, noticed a sharp difference between the muted response of the stock market to the emergent coronavirus and the charitable foundation’s own prognosis.
Moakes’s colleague Sir Jeremy Farrar, a world-leading epidemiologist and then the director of Wellcome, the UK’s largest provider of non-governmental funding for scientific research, was one of the earliest to warn of the virus’s significance.
“We thought this is really odd, because markets are doing nothing, and yet we’re being given a bunch of signals here, which tell you that the markets are way too complacent,” Moakes, 61, recalled.
Farrar’s warnings — alongside his own concerns about elevated equity valuations — led Moakes to instigate “significant hedges” on Wellcome’s equity portfolio in early 2020. These soon paid off when stock markets crashed in response to Covid-19.
“We made decent money,” said Moakes. “Having those hedges going on through that period when the world was literally falling apart gave a great deal of comfort to our stakeholders, many of whom were deeply involved in the pandemic.”
That call is one of just a handful that Moakes made during almost a decade as Wellcome’s chief investment officer. He stepped down earlier this year and continues to be involved as an adviser.
“We need to make a small number of decisions, and we need to make them in a size that is going to make a difference to the portfolio,” said Moakes of the foundation’s investment approach. “If in doubt, do nothing . . . Just occasionally, there’s an opportunity to do something which, at the time, always feels deeply uncomfortable.”
Other key investment decisions — some of them building on foundations set out by his predecessor as CIO, the late Danny Truell — included reducing exposure to equities and other risk assets in the run-up to the financial crisis. This gave Wellcome the ammunition to snap up megacap equities after the collapse of Lehman Brothers in September 2008, benefiting from a rebound in equity markets in the decade that followed.
During the mid-2010s onwards, said Moakes, “we put a lot of effort into deploying money with the very best private managers, particularly in early-stage venture capital”. This gave Wellcome exposure to “a whole slew of innovation that came through” in the early part of this decade, helping the foundation to a total return of 34.5 per cent in the year to September 30 2021, its strongest annual returns in more than two decades.
Since Moakes joined Wellcome in 2007, its investment portfolio has grown from £15.1bn to £37.6bn today, and the foundation has spent more than £15bn on its mission: to fund scientific research into mental health, infectious diseases, and climate and health.
In the decade to September 2024, Wellcome recorded annualised returns of 11.3 per cent in sterling terms, outperforming peers including the Oxford Endowment Fund, the Cambridge University Endowment Fund and Harvard University’s endowment.
“Nick is a far-sighted investor who has had some big wins from taking bold asset allocation decisions,” said Ewen Cameron Watt, a former chief investment strategist at BlackRock, who hired Moakes at SG Warburg earlier in his career.
The Wellcome Trust, which was founded in 1936 following the death of US-born pharmaceutical magnate Sir Henry Wellcome, is in a rare position. It answers to neither clients nor shareholders, has an unlimited time horizon and can issue cheap debt. All of this gave Wellcome the “competitive advantage”, said Moakes, of being able to invest in ways most institutional funds cannot.
“The compelling feature of the Wellcome Trust is that they don’t act like the herd,” said Cameron Watt. “At their size, you need to pull levers quite hard to make a difference to the portfolio and there’s a limited number of things you can do. It’s a sign of gold standard management that they have found levers to pull.”
Moakes was hired from BlackRock in 2007 as head of public markets at Wellcome by its then-CIO Truell with a mandate to diversify the portfolio globally beyond the UK, bring more investments in-house and push further into alternative assets such as private equity so that its asset allocation was more akin to that of a US endowment. He became CIO of the organisation in 2017.
“Get your currency right. Have risk assets when things are going up, have enough cash to survive the more difficult periods and beyond that, try not to do too much,” said Moakes.
Not every investment call has been right. Notably, Moakes said he was too slow to cut exposure to China: “I was too sanguine about the impact on asset prices of the political change that we’ve seen in China . . . structurally, the right thing to have done would be to be pretty wary of emerging market stuff over the past decade and a half, and I’ve probably been too in love with it.”
Meanwhile, Wellcome’s equity holdings have underperformed broader markets for the past couple of years from “not having had that bet on US exceptionalism . . . it’s not had enough of the Magnificent Seven and all of that”.
Moakes and Truell also sought to capitalise on Wellcome’s long-term time horizon and triple A credit rating to issue a series of long-term bonds. Notably, in 2018 it issued a £750mn 100-year bond with a 2.517 per cent interest rate. It “enabled us to invest in equities which have subsequently delivered really strong returns”, said Moakes. “It was well worth doing for the long term, even if I don’t live to see the benefits.”
Moakes stepped down as chief investment officer of Wellcome just days before US President Donald Trump’s so-called liberation day on April 2 upended US trade policy.
“The dollar is probably the single biggest risk for us out of all of this,” said Moakes. “What would be a real problem would be if we started to get a bit of a disorderly devaluation in the dollar.” For now, he does not see that happening: “For all of the noise, the reality is that the US has a big stake in the rest of the world and the rest of the world has a big stake in the US, particularly the US bond market.”
Moakes said tariffs made him uncomfortable “because there hasn’t usually been a good outcome from tariffs in an economic sense”. The Trump administration’s erratic trade policy “just tells you that this is unclear, undecided and uncertain. So that’s an environment where we’re in major doubts.” He returns to the mantra that has guided his tenure leading the investment team: “If in doubt, do nothing.”