Ethical stance ‘not to blame’ for fall in returns on Church fund
THE HEAD of the Church of England’s investment arm has flagged that its £7.9bn fund will fail to match the stellar returns logged in 2016, but said ethical policies were not to blame.
While the fund managed to rake in a bumper 17.1 per cent return on the back of a strong performance in equities in 2016, it sold down its stock holdings by about 17 per cent or £500m to help re-balance the portfolio during the same year, meaning a smaller boost from a further rise in stock prices is expected from 2017.
Andrew Brown, secretary and chief executive of the Church Commissioners, said: “Like all investors we were faced in 2017 with a number of headwinds and we’ve seen it with sterling, we’ve seen it with inflation and global markets have slowed.
“Equities had the strongest year in 2017, but equities make up about 40 per cent of our fund, so we’re heavily diversified,” he said, adding that the fund invests in a raft of real estate, absolute return funds, hedge funds, private equity and venture capital. “So 2017 is not going to be such a strong year as 2016, I’m sorry to say.”
It means expectations for income growth will have to be managed, as the fund helps provide about 15 per cent of the Church of England’s annual operating costs.
However, Mr Brown said the weaker performance was not due to the Church Commissioners’ responsible investment policy, which excludes stakes in companies that do business in areas involving tobacco, gambling, highinterest-rate lending, human embryonic cloning and oil sands extraction. It is also committed to engaging with firms on environmental, social and governance issues, in the hopes of either changing corporate behaviour, with divestment a last resort.
Late last year, the Church threatened to pull investment from mining companies that fail to “uphold high standards”, saying the industry is “particularly vulnerable” to poor governance.