Church of England posts 4% gain from real assets allocation

The manager of the Church of England’s £8.3bn (€9.4bn) investment portfolio has hailed a successful year for its in-house property team while warning of subdued investment returns ahead.

Church Commissioners for England recorded a 7.1% investment return overall, compared to 17.1% for 2016. This undershot its investment target of inflation plus five percentage points (9.1% in 2017).

After several years of strong performance, the fund’s real assets allocation delivered a relatively subdued 4% in 2017.

Commercial property markets continued to perform strongly, generating a 10.5% return (on a 3.5% allocation), but other markets, including London residential property and English farmland, were flatter.

Loretta Minghella, first Church estates commissioner, said: “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.”

The church fund’s largest single real estate allocation was UK rural land holdings at 8.5% of the portfolio at the end of 2017. This allocation returned 4.9% in 2017. Meanwhile residential (6.1% of the portfolio) returned 6.1%.

Its timberland investments lost 7.4%, compared with a 24.3% gain in 2016. The asset made up 3.6% of Church Commissioners’ overall portfolio at the end of 2017.

One focus of management resources was a sandalwood plantation in Australia, which was expected to generate high returns when it started delivering sustainably produced oil for use in the fragrance and pharmaceutical sectors in the late 2020s.

Another focus was renewable energy opportunities: during 2017, planning permission was granted for a 126MW wind farm in Scotland, backed by the church fund.

The Commissioners said: “We believe that prospects going forward are more muted than the recent past and we therefore retained our cautious approach, focusing efforts to create long-term value.”

They continued: “In the absence of a market correction in the near term, we will likely find ourselves in a low-returning environment for some years to come. This will mean that returns are generated principally by income and active asset management.”

Related images

  • St Paul's Cathedral, London

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Now