Church of England investment fund falls short of target
Annual figures from the Commissioners which look after the assets for the Church of England, revealed that investable assets increased from £8.3bn from £7.9bn in 2016.
However, the figure was also far below the 17.1% return recorded in 2016 and falls short of the 9.4% average return of the fund over the past 30 years.
It reported that active management in 2017 was an important factor to the gains seen in equities and real assets while bond markets were relatively weak. Further, sterling’s strength also impacted on the performance for the year.
Taking each asset class in turn, the Commissioners stated that equities generated strong returns of 15.9%, outperforming the market (13.2%) while fixed income (global high yield bonds, emerging market debt and private credit) returned 4.8%.
Private equity, which invests in unlisted companies, achieved a total return of 7.2% in 2017, significantly outperforming quoted equity markets. As such, the Commissioners said it is looking to increase its allocation.
Financial returns from the real assets portfolio were much more muted in 2017, delivering 4% while commercial property markets performed strongly with a return of 10.5%. However, it noted London residential property and English farmland were “flatter”.
Non-pension support for the Church by the Commissioners totalled £144m, up from £108.5m in 2016.
First church estates commissioner, Loretta Minghella, said: “Mindful of our mandate to support the Church of today and the Church of tomorrow, consistency over the long term continues to be a guiding principle of the fund. While this year’s performance at 7.1% was short of our target of 9.1% (RPI + 5%), our historic performance over a 30-year period shows annual growth of 9.4% per annum (target 8.4%) and 12.4 % over five years (target 7.4%)
“The macro-economic environment is changing and anticipating muted returns in the future we will continue to develop our focus on non-traditional asset classes. Our perpetual endowment and long-term horizon is well suited to maximising returns from less liquid markets including venture capital.
“We continue to be at the forefront of responsible investment practice. Taking account of environmental, social and governance (ESG) issues is an intrinsic part of being a good long-term investor, for both ethical and financial reasons, and forms an essential part of our investment analysis and decision-making process. The Church Commissioners have a unique opportunity and responsibility as leading faith investors to work with partners towards the common good.”