Billions of pounds have been wiped off the value of the Wellcome Trust's endowment fund in the past two years, forcing it to review future funding plans for medical and biomedical research.
The trust, the UK's largest funder of medical and biomedical research, blamed stock-market falls for the drop, which resulted in its total endowment value falling from £15 billion in 2000 to £9.3 billion.
It said that it had no plans to cut funding but would be reviewing future spending plans. Last year it spent £585 million against an income of £306 million.
In the trust's annual report last month, chairman Sir Dominic Cadbury wrote that Wellcome's diversified portfolio had enabled it to weather "the worst of the market's recent volatility".
But doubts are being raised about whether the trust will be able to honour all of the £280 million increase in spending on UK science, announced last year.
The news comes a week before a report from MPs severely criticises the Medical Research Council for failing to fund top-rated grant applications.
Peter Cotgreave, director of lobby group Save British Science, said: "This is a double whammy for researchers in this field."
Universities have also lost hundreds of millions of pounds in endowments as the result of falls in the stock market.
Cambridge University and its colleges, which together comprise the richest institution, had an estimated £3.1 billion in endowments in 2001.
That plummeted to £2.6 billion a year later and has now fallen to an estimated £2.3 billion.