Church of England blessed by property boom

The UK's property boom helped the Church of England's investment portfolio to reach £6.7bn last year, which is more than £1bn higher than before the financial crisis.

Bolstered by new ventures into private credit, and by increasing investments in forestry and timber - making the C of E the largest private owner of forestry in the UK - the Church commissioners reported a total return of 14.4 per cent for the year.

The commissioners' performance continues the recovery of the Church's finances after the dark days of 2008, when near-disastrous losses forced it to raise the retirement age for the clergy.

The property portfolio, which the fund largely manages itself, was a particularly strong performer, rising 27 per cent in 2014 to reach £2bn. Particularly noteworthy was the sale of the fund's 64 per cent stake in the Pollen Estate, the owner of property in Mayfair, central London, which netted £381m - the commissioners' largest single property transaction.

"It was a good year," said Tom Joy, the commissioners' director of investments. "The key thing about property is that we have a lot of it - so when it performs well it is a strong contributor."

After making charitable donations of £215m, the fund was valued at more than £6.7bn - nearly £600m higher than at the end of 2013, and its highest-ever asset value. Longer-term performance on a range of measurements was also above the commissioners' target of inflation plus 5 per cent per year.

Another key area was timber and forestry, which now comprises nearly 4 per cent of the portfolio, and produced a 22.3 per cent return over the year.

The Church also continued to step into the credit void created when banks withheld funding to businesses after the crisis, making new allocations of £50.5m to private credit funds as it sought to meet what Mr Joy called "a real demand for alternative sources of credit". The private credit portfolio as a whole produced a 10.2 per cent return.

However, performance from UK equities was flat in 2014, although global equity investments did return more than 11 per cent. For the first time the commissioners included a "responsible investment review" in its report, which was published shortly after the Church announced it was to blacklist investments in coal and tar sands, which are two of the most polluting fossil fuels.

"We have stepped up our reporting on ethical and responsible investment activities," said Edward Mason, who was brought in to the commissioners last year from the Church's ethical investment advisory group. The Church also excludes investments in companies involved in the arms trade, pornography, tobacco, gambling and human embryonic cloning.

The report states the commissioners will implement a policy on companies that earn revenue from alcohol sales, investing in them only if they meet certain standards on marketing and sales.

Among the big spending items for 2014 were the £215m in charitable expenditure and £123m allocated to pensions.

That helped to make the Church the second-largest charity in the UK, and the eighth-largest in the world.

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