Wellcome Trust, the charity which is cutting its stake in the drugs group from 73.6 to about 35 per cent, has asked BZW Investment Management, the fund manager, to set up a UK equity indexed fund. That will take at least pounds 500m of the proceeds, although it is believed the figure could be increased to pounds 1bn.
One of the aims of BZW Securities' dealing facility is to provide a pool of shares for the indexed fund.
'The market is quite illiquid at the moment,' said Simon de Zoete. 'This is a means of creating liquidity and a cost-effective means for Wellcome Trust to reinvest part of the proceeds in a broad range of UK equities.'
The fund, which will take the FT all-share index as its benchmark, will invest in its largest 450 constituents. The dealing facility, which opened yesterday, will buy shares at their closing price next Friday, when the Wellcome offer closes. It is open to British and overseas investors and is not conditional on the institutions applying for Wellcome shares.
Wellcome Trust has also appointed Schroder Investment Management as interim manager of the funds. Roger Gibbs, chairman of the trust, said that at least 80 per cent of the funds would be invested in equities, but this would be over the 'very long term. In the shorter term, fixed-interest securities offer substantial real returns.'
One aim of the sale is to boost the trust's income, which it spends on medical research. Wellcome's shares yield less than 2 per cent compared with the market average of almost 5 per cent.
The trust already has four fund managers - Morgan Grenfell, James Capel, Robert Fleming and Henderson - for its pounds 300m portfolio. But their contracts are due for renewal and the trust has invited other applications.
Mr Gibbs said he had had 175 applications and expected to interview about 20 firms. It is likely that the money will be split between five or six firms.Reuse content