'Greedy? Short-termist? No, quite the opposite'
Margareta Pagano meets Sir Bill Castell, chairman of Wellcome, the medical charity and private-equity investor 1 n the 1880s two young American salesmen-cum-pharmacists, Silas Mainville Burroughs and Henry Wellcome, invented the 'tabloid'. It was not a cutdown newspaper but a form of compressed pill — the name was an elision of 'tablet' and 'alkaloid' — which they imported to Britain. Helped by its sales, their company Burroughs Wellcome achieved huge success: insulin was another of their inventions, while Henry Wellcome created the first proper medical bags, giving them to Stanley for his trips to Africa and Scott for his walk to the Pole.
When Sir Henry Wellcome (as he became) died in 1936, he left a fortune which he asked five trustees to distribute for the improvement of human and animal health. Though canny investment, the Wellcome Trust is today the world's biggest medical charity (just beating the Gates Foundation) with funds worth £14 billion. Over the past two decades the portfolio has seen average returns of around 15 per cent; returns from its venture capital interests have averaged 90 per cent over ten years.
That's why Sir Bill Castell, Wellcome's chairman, couldn't understand the fuss earlier this year when Wellcome disclosed plans to back a bid for Alliance Boots with Terra Firma, the private equity house. Ironically perhaps, the tabloids lashed out at Wellcome's involvement with greedy, short-termist private equity. Even academics — eager recipients of the trust's millions — denounced the deal.
Wrong, says Casten. 'One of Wellcome's greatest advantages is that it can invest for the long term. That's exactly what we saw in the Boots investment. There has been neither a switch in strategy nor any abuse of the trust's guiding principles.' He adds that the trust has always invested in a broad range of asset classes to maintain higher-than-average returns. Today the portfolio has 56 per cent in equities, 2 per cent in cash and the rest in property, private equity and alternative investments. 'It's one hell of a job, but our strategy allows us to invest where the return may take decades. The long-term success of our investment strategy means we can fulfil the trust's mission. . . . Look at how Wellcome has been able to fund ground-busting medical research such as the sequencing of the genome with the Genome Project and is behind the latest work on proteinomics, the next stage of the human map.'
This year the trust will fund, from its income, about £500 million for biomedical projects, ranging from stem cell technology to anti-malarial vaccines, and will do the same again in each of the next three years. Over the past thee years Wellcome has given £158 million to Oxford, £150 million to UCL and £145 million to Cambridge, making it the biggest investor in medical research in the UK.
'We couldn't do this if the trust's investments hadn't performed so well. Part of that success has been that we invest long-term. Let's remember that Henry Wellcome was first and foremost a globalist and a marketing man,' Castell says. Wellcome was indeed one of the first salesman to persuade doctors to promote his drugs, but he also set up research labs to discover new ones.
Castell says critics of private equity should remember too that Wellcome was going back to its roots by wanting to invest in a listed UK company: 20 years ago, the trust first diversified by floating the Wellcome pharmaceuticals group, selling a quarter of its shares to the public. Wellcome and Terra Firma lost the bid battle for Alliance Boots, but the experience has not dented Wellcome's appetite: the trust is still the single Britain's biggest private-equity investor, with £6 billion in alternative assets such as hedge funds and venture capital — allowing it to increase returns and reduce volatility. Castell and his chief investment officer, Danny Truell, have also defended the industry's favourable tax treatment, arguing that any changes will reduce funds for research.
It's been 17 months since Castell brought his skills to Wellcome's spectacular HQ on Euston Road. He joined from GE Healthcare, where he was chief executive of the world's biggest medical diagnostics group, part of the US industrial giant GE. Castell began his career at Wellcome 40 years ago, moving to Amersham plc as chief executive and turning it into a £5 billion business before selling it to GE.
He liked Wellcome's decision last year to raise a bond — the first charity outside the US to do so. As a triple-A rated institution, it raised £550 million to improve its funding power. But he wasn't so sure about the heavy emphasis on investing in UK science, where the trust gives 85 per cent of its endowments. He challenged the strategy, but ended up agreeing with it: 'After a thorough review we concluded that actually it was right to do so because it was clear that Wellcome could make a difference by ensuring that Britain stays a world-class centre of scientific research. We have to stay competitive.'
'Constantly questioning myself and the board about what we do,' is Castell's definition of his role — 'more about having influence than power.' He reckons that this is the greatest difference between being a chairman and a chief executive. The other difference is that he's not so grumpy: 'Sunday nights used to be terrible. I just got more and more anxious, worrying so much about the operational issues I'd be facing at GE on a Monday morning.'
He may be less grumpy but he is only slightly less frenetic. Still on the board of GE, he recently became a director of BP, sits on numerous bodies where he bangs heads between academia and industry, and has joined Gordon Brown's business council. He's just off to check out the newly finished Diamond Synchrotron Project on the Harwell Science Campus in Oxfordshire, which Wellcome has co-funded. The synchrotron produces the brightest light possible — ultraviolet and X-ray beams — to look at the atomic structures of molecules. It has all the hallmarks of a Wellcome project — cutting-edge and collaborative, with scientists coming from around the world to use it. 'It's the most extraordinary place, a sort of hotel for scientists who use the light in their work on the structure of materials — looking at everything from the building blocks of life to the origin of the planet,' he says. Just the sort of p11771e Henry Wellcome tried to solve.
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