Information	Contact us
Media Centre	Home

home / about the church / church commissioners / annual report 2008 / asset management

Tell us what you think about our website

Asset management

Investment

We hold most of our fund in equities and property as we believe that in the long term these should perform better than bonds and cash.

But we keep asset allocation under review in response to market conditions. Over 2005-08 we reduced our exposure to UK residential property by £400 million and to commercial property by £250 million, leaving us less badly placed in the current financial climate than we might otherwise be. We continue to diversify our securities portfolio.

Fund performance

The credit crunch put financial systems worldwide under great pressure. Stock markets around the globe did badly and, averaged over the last 10 years, we have fallen short of our target return of at least 5% above inflation. We have nonetheless averaged a total return of 5.7% per annum compared with 3.7% per annum average for UK pension funds. This equates to £26 million more in Commissioners’ distributions to the Church each year than would have been possible on the basis of industry-average fund performance.

In 2008 our total return was -19.6% compared with the -17.2% return from the average fund in the WM All Funds universe. This reflects the fact that only UK bonds and cash – in which we are relatively light - and let land delivered positive returns. Our relatively high weighting in property has however added to fund performance in all but one of the past ten years.

Securities and cash

Our consolidated UK equities portfolio declined 31.0%. Ethical investment policy restrictions dampened performance by 1.4 percentage points in a year when tobacco, alcohol and arms-related companies performed relatively strongly.

Developed stock markets did best globally. Emerging economies were the weakest performers. Our global equities portfolio declined 21.6. Late in the year we set up a global equities mandate that includes sustainability research in its investment strategy.

Real estate
We refurbished a London office and a number if retail and industrial estates across the country. We started two major re-developments at the Hyde Park estate to add 14 high value flats to the portfolio. Our low vacancy rate, currently 1.2%, should give us a good grounding in what will be a challenging year for lettings. The Connaught Village festivals (Hyde Park) remain popular and attract residents and new visitors.

Let land showed a modest increase by the year end with a total return of 6.6% driven by commodity price increases that were regrettably not sustained. We let a 650 acre site on the Isle of Grain, have completed researching and mapping our surface estates and are working to complete land registration.

Our strategic land portfolio returned a predictably low –37.7% in a poor climate for development, but we progressed major development plans including at Ashford, securing a pipeline of several thousand dwellings for the future, and at Peterborough, Ely and Northallerton.

UK indirect property fund values fell significantly. Overseas funds have so far held up fairly well, boosted by favourable exchange rate movements.