Faith, hope and hedge funds for Church of England By Miles Johnson, Hedge Fund Correspondent ©Charlie Bibby/FT The Church of England is ramping up the exposure of its £6bn endowment to alternative investments such as hedge funds and private equity in a move that will cement its position as one of the UK’s largest single investors in these types of assets. The Church Commissioners who manage the endowment will meet next month to decide on the fund’s allocations and are set to increase its exposure to alternative investments, which also include residential property and farm land, according to a Church spokesman. Alternatives already account for almost a third of the fund. 1 More ON THIS STORY 1 C of E appoints US company to screen funds 2 Church of England invests in Wonga backer 3 Lunch with the FT Justin Welby ON THIS TOPIC 1 Matthew Engel Church closer to appointing women bishops 2 Dear Archbishop, Church is in pension denial 3 The Big Picture Wonga debacle shows need for portfolio scrutiny 4 Wonga turns Biblical in riposte to Welby IN UK 1 Salmond pound plan seen as ‘Panama’ fix 2 3 4 Help not blame on food bank front line Tourist data flag up London and SE’s role UK’s winter was wettest on record One option the commissioners will consider is boosting the amount invested in hedge funds, a move they would have to reconcile with an ethical policy that stipulates the Church should avoid investments that are inconsistent with Christian values. The Church’s Ethical Investment Advisory Group concluded last month that “investment portfolios will never be pure . . . Ethical ambiguity is intrinsic to life”, but that through active investment and engagement with companies it could act as a force for good. “We will graze our knees but this is better than disengagement – we need to be involved on the field of play, not on the sidelines,” it said. The ethical investment policy was called into question last year when it was revealed that the endowment had an indirect holding in Wonga, the payday lender that had been publicly attacked by Justin Welby, Archbishop of Canterbury. Mr Welby had said he wanted to put Wonga “out of existence” by championing credit unions. The proportion of the endowment allocated to hedge funds has almost tripled since 2009 to 10 per cent. The Church has vowed in recent years to oppose high pay at banks, yet managers running hedge funds and private equity portfolios frequently earn salaries that dwarf those of the highest paid bankers. The Church’s endowment suffered a £1bn loss during the 2008 financial crisis but has since seen the value of its assets rise sharply, thanks to a big bet on equities and an alternative allocation that is more aggressive than the typical pension fund. Its investment in hedge funds returned 5.9 per cent in 2012, according to the commissioners’ most recent annual report, in which the Church said it was planning to “improve the diversification of the portfolio by adding additional managers with complementary characteristics”. The Church is the 15th largest single investor in hedge funds in the UK, and one of the top 50 in private equity, according to Prequin, the data provider. The endowment aims to achieve an annual return of 5 per cent above inflation, a target it has consistently outperformed in recent years, gaining 15.6 per cent in 2009 and 15.2 per cent in 2010. Its total return since 1992 is 550 per cent.
Posted on: Wed, 05 Mar 2014 10:36:56 +0000
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