Wellcome Trust's investment portfolio gained 12.3% over the year ended Sept. 30, with total assets growing 8.7% to £32.6 billion ($41.9 billion).
The London-based global charitable foundation, which focuses on improving health around the world, gained 6.9% in its previous fiscal year ended Sept. 30, 2019.
Assets net of liabilities grew 8.6% to £29.1 billion.
The return was boosted by good performances across most of the fund's assets, its annual report said.
The £14.6 billion public equities portfolio gained 9.9%, up from 6.8% in the 2019 fiscal year. "Performance was particularly strong among our outsourced managers and from internally managed stocks in emerging markets," the report said.
The fund's £3.7 billion hedge fund allocation gained 17.1%, compared with 9.2% a year ago, as managers were "able to avoid the worst of the market drawdowns but retained enough exposure to benefit from the market rally." Equity long/short strategies showed especially strong performance.
Private equity exposure reached its highest net asset value this year at £9.4 billion. The allocation gained 12.7%, down from 2019's 15.6% return.
Real estate fell to £1.9 billion of the portfolio due to the £748 million sale of a student housing business, the report said. These proceeds more than offset "a more difficult period in the rest of the property portfolio," with an overall return of 9.6%. In 2019 the return was 1.5%.
The fund also had a £3 billion allocation to cash and bonds.
The report said the fund was also "more than usually active" in its overlay exposure this year, raising cash levels and hedged exposures to about 20% of the public equity allocation before the market falls. Executives used futures and options on U.S., European and emerging market indexes. The hedges were taken off in April and May "as it became clear that the policy response had been sufficiently strong to avert a prolonged market decline." Total profits on these hedges and foreign-exchange exposure were £334 million for the year.
"However, these overlay gains were mostly offset by losses due to increases in the mark-to-market valuation of our bond liabilities as interest rates fell," amounting to a loss of £260 million. "These losses will eventually be reversed as the bonds approach maturity," the report said.
The fund managed 44.9% of assets in-house as of Sept. 30, down from 50.8% last year. Externally managed assets accounted for 46.1%, up from 45%, while cash and bonds accounted for the remaining 9% of assets, up from 4.2% last year.
"The board has been immensely impressed by how the team has navigated with confidence the threat to the world economy caused by COVID-19 this year," said Eliza Manningham-Buller, chairwoman of the fund, in the report. "Locking down major economies put huge strains on many businesses in which we invest and on financial markets, while accelerating important economic trends such as the shift to e-commerce. Equity markets endured one of the steepest declines and fastest recoveries in financial history. Despite this, the portfolio has not just survived, but prospered in this highly volatile environment," she said.