Monday, 16 May 2016

Church Commissioners announce total 2015 return on investments at 8.2%

Updated Monday night

The Church Commissioners have issued their annual report for 2015 this morning, and the following accompanying press release.

Church Commissioners announce total 2015 return on investments at 8.2%

The Church Commissioners for England have announced their latest financial results with the publication of their annual report.

The Church Commissioners’ total return on their investments in 2015 was 8.2 per cent, exceeding their long-term target rate by 2%. Over the past 30 years the fund has achieved an average return of 9.7% per annum. After taking account of expenditure, the fund has grown from £2.4bn at the start of 1995 to £7.0 billion at the end of 2015.

In 2015, the charitable expenditure of the Commissioners was £218.5 million, accounting for 15% of the Church’s overall mission and ministry costs. Commissioners-funded projects ranged from clubs and drop-ins to youth work and food bank hubs, all supported by local churches.

Andrew Brown, Secretary of the Church Commissioners, said: “I want to congratulate the investment team for the continued strong performance, delivering more than 8% in a challenging financial climate. Without this leadership and good stewardship it would not be possible to support the Church as we do. But we must not forget the generous support from parishes, dioceses and cathedrals which provide around three quarters of the Church’s annual spending on ministry and mission.”

First Church Estates Commissioner, Sir Andreas Whittam Smith also congratulated the long-term performance but warned of harder times ahead due to the nervousness of investors: “The Commissioners’ fund has grown by an annual average of 9.7% over the past thirty years compared with an annual inflation rate during the same period of 3.4%,” he said. “Unfortunately it may be harder in the future to achieve such a satisfactory performance. My message to the wider Church is – don’t count on it. The nervousness of investors is explained by the feeling that governments have lost the power to reverse any slowdown in economic activity. In earlier time they would reduce interest rates, but now that rates hover around zero, that remedy is unavailable.”

Examples of funding provided in the report include:

  • Supporting ministry costs in dioceses with fewer resources
  • Providing funds to support strategic mission activities including:
  • Strategic Development Funding for large scale projects amounting to more than £6m, such as the Growing Younger initiative in Birmingham Diocese;
  • Supporting new churches to be planted across the country from a new City Centre Resourcing Churches fund, such as St Swithin’s, Lincoln;
  • Pioneering church workers in new communities such as the Olympic Park in Stratford, East London and a new housing estate in Exeter.

Growth and diversification

Notable performance was once again delivered in property, private equity and timber. The property markets in which the Commissioners are invested were strong across the board and their property portfolio totalled just less than £2bn at the end of 2015 with an average return of 14.4%, generated through active management of a high quality set of properties.

The private equity portfolio continued to grow in the year, bringing the total to £87.7million. These strategies generated a combined return of 20.2% in 2015.

The Church Commissioners continued to invest in forestry with two new holdings in Australia, bringing the total holdings to nearly 120,000 acres. The timberland and forestry portfolio delivered a total return of 13% in 2015.

Responsible investment

The Church Commissioners’ ambition is to be at the forefront of responsible investment practice. In 2015 the Commissioners adopted a new climate change policy, setting out a comprehensive approach to climate change including how we divest, how we seek low-carbon investments and how we engage with companies and public policy. The Church Commissioners are actively integrating environmental, social and governance (ESG) issues into investment analysis and decision-making.

Notable work in 2015 included the Commissioners’ role in the Aiming for A initiative and the success of the shareholder resolutions on climate change disclosure that the Commissioners co-filed with BP and Shell. These were overwhelmingly passed at both companies, with the support of their respective boards.


The annual report can be download here. The annual review can be downloaded here.

Andrew Brown, Secretary of the Church Commissioners has commented on 2015’s results. Audio is available here, and video here. (1 min).

Edward Mason, Head of Responsible Investment for the Church Commissioners, has commented on our responsible investment work in 2015. Audio is available here, and video here. (1:53 min)


Press reports

Katie Allen The Guardian Church of England sells investments fearing market slowdown

John Bingham The Telegraph Church of England invests in Google despite criticism of its tax record

Posted by Peter Owen on Monday, 16 May 2016 at 1:01am BST | TrackBack
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Categorised as: Church of England

Congratulations to all concerned for achieving this encouraging result. I only wish my Savings Bank Account paid 8.2% in Interest as opposed to the measly 1/2%! The two videos begin with the motto "Investing in the Church's Growth". Would that the Church of England congregations had also grown nationally by 8.2% in the last year, that would have been yet more Good News.

Posted by: Father David on Monday, 16 May 2016 at 6:34am BST

This is a fantastic result. We've got Archbishops' Council tomorrow, at which we will be looking at ways in which the money from the Commissioners can be used strategically for the mission and ministry development which is at the heart of Renewal and Reform. The encouraging thing about that is the rigour with which the Commissioners monitor and expect the Church to justify the spending of the money they have seen from the investments. It really does focus the mind.

Posted by: Simon Butler on Monday, 16 May 2016 at 1:41pm BST

"Would that the Church of England congregations had also grown nationally by 8.2% in the last year, that would have been yet more Good News."

We tried to do our bit - but only achieved 9% growth (in a fairly 'central' parish). However, I can't believe it's all about numbers...

Posted by: NJW on Monday, 16 May 2016 at 5:00pm BST

Whilst this is good news, I share the First Commissioner's apprehension about the future and the relative improbability of this rate of return continuing. The Commissioners are one of the most successful funds, so much so that I sometimes think they would provide much better value for the wider community of investors than many hedge funds with their egregious 2-and-20 compensation arrangements.

However, much of this positive performance is a function of QE goosing returns on equities (at least until early this year) and property inflation (which is pretty terrible news for tenants who have to pay higher rents or successors in title who are required to pay inflated prices for property).

Also, I suspect that the success of the Commissioners is, in large measure, attributable to the fact that, since 1 January 1998, its responsibility for pension accruals for the DB clergy pension scheme has reduced year-on-year, whilst that of the dioceses has increased: a stereotypical robbing-Peter-to-pay-Paul scenario which now warrants a reassessment.

If the Church authorities were to provide a composite picture of the finances of the Church, by including details of the state of diocesan finances (and any funding gaps on the part of the dioceses with respect to the pension scheme), together with reasonable projections of the cost of maintaining and insuring church buildings, then I think that we might have a more realistic appreciation of the financial state of the Church overall.

So much, of course, depends upon what is to happen with interest rates. The pressure that near-negative rates is putting on the fund management industry, the banks and insurers is becoming increasingly acute.

We have simply never been here before in the history of interest rates. If you had told a fund manager in 2000 (or even in 2008) that interest rates would be hovering around zero for most of the time since those dates, many would have laughed in your face. It used to be said that the British would stand anything, but they must have their 2%, and many would now be grateful even for that.

Interest rates are, arguably, validated by economic growth - but what if growth is increasingly difficult to generate? Also, if resource constraints start to bite as the global population nears 10 billion might we not see a ghastly combination of inflation and endemic low rates? Perhaps the Commissioners need to plan for the worst...

Posted by: Froghole on Tuesday, 17 May 2016 at 12:54am BST

Of course it's not "all about numbers" but any reading of the Acts of the Apostles (aka the Acts of the Holy Spirit) will shew that numbers are important. Acts tells us, with its ever increasing number of those converting to Christianity and being baptised that it's all about Growth, Growth, Growth as opposed to Decline, Decline, Decline.

Posted by: Father David on Tuesday, 17 May 2016 at 3:39am BST

Gosh! is this the direct consequence of enrolling clergy as MBAs? Saint Francis had a name for money, rhyming with wit! Will this windfall buy us out of the entrenched problems of sexism and homohobia?

Posted by: Father Ron Smith on Wednesday, 18 May 2016 at 3:48am BST

The Church has a need for sound finances, both as a good employer, and as a guardian of buildings, and to empower and support service and mission. So these figures are at least reassuring in that sense.

Good stewardship is important, not least because of the 'widows mites' that get given by sometimes very poor church members in good faith.

It's also important as a witness to people in our communities, that we try to be ethical, environmentally friendly, and distanced from 'Caesar' and the whole imperial thing of pursuing profit as an end in itself.

The few questions I have (and I'm not trying to be negative about figures that could have good and positive results in supporting mission and the service of communities at home and abroad who desperately need support) are:

1. Hopefully the property profits have not been supported by raising rent above the rate of inflation. That would be unconscionable. Just because the market rate for rents has been soaring, that does not make it right.

2. I raised my eyebrows a little at some of the salaries being paid to a few high earners working for the Church - as detailed on page 63 of the report. It would be seem that some people are being paid 8 to 10 times what I earn as a nurse, and that there may even be additional performance-related payments. It's not that I'm asking for higher wages myself, but I think it's important that the Church does not follow corporate tendencies to pay high wage multiples to some of its employees, as if there is some kind of 'professional class' who deserve and are entitled to be paid vastly more than the rest of us. I don't really see that anyone is worth 10 times a nurse or a teacher, whatever they do. And don't get me started on carers working the shittiest but deeply precious roles on minimum wage.

Those points aside (and, obviously, hoping that investments grow increasingly ethical and environmentally friendly) I do think that these results indicate some good stewardship, for which those involved deserve acknowledgment.

Posted by: Susannah Clark on Wednesday, 18 May 2016 at 2:18pm BST

I think, Susannah Clark, that "The Church" is a misleading phrase to use. The Church Commissioners for England is (like each parish church) an independent charity, and its finances, as Froghole pointed out, are but a fragment of the finances of "The Church". It's also the case that "The Church" has remarkably few employees --- the parochial clergy are mostly not employees, and most employees are employees of parishes or dioceses, not of the central C of E. Likewise almost all the buildings are not in the ownership of any central body, but of incumbents or cathedral chapters.

Oh for a readable account of the finances of the mosaic that we call the C of E, and the flows of resource within it: can anyone point me to one?

Posted by: american piskie on Wednesday, 18 May 2016 at 4:43pm BST

@American Piskie: I am afraid that you will probably struggle to find much material that gives a composite picture of the finances of the modern Church of England rather than the Commissioners per se. Information about the Church of Ireland and the Church in Wales is still more difficult to obtain; they were both comprehensively disendowed on disestablishment, and then re-endowed heroically by voluntary subscriptions and bequests. How much of those endowments remain is moot, but their respective representative bodies may have information they are willing to divulge (much the same applies to the Scottish Episcopal Church, though it was [arguably] not subject to the same process of disendowment). It is likely that these churches are financially enfeebled and that they have already sold most of what is worth selling. Others - who are better informed - may be able to correct me, and I must apologise for any inadvertent slight.

There are two excellent books on the history of the Church Commissioners and its predecessors, the Ecclesiastical Commissioners and Queen Anne's Bounty. These are: (i) G. F. A. Best 'Temporal Pillars: Queen Anne's Bounty, the Ecclesiastical Commissioners, and the Church of England' (Cambridge, 1964 - which is superb); and (ii) Andrew Young 'The Church of England in the Twentieth Century: The Church Commissioners and the Politics of Reform, 1948-1998' (Woodbridge, 2006). These are works of institutional history.

There is an enormous literature on the finances of the Church in the more distant past, especially in the sixteenth and seventeenth centuries (when it was being pretty effectively asset stripped), but to provide even a limited bibliography would take me well over the 400 word limit.

I have heard quite a lot of anecdotal evidence during the course of my travels which indicates that many dioceses are in acute distress. Even formerly well-to-do dioceses like Rochester are now running substantial deficits, and I think this must have something to do with the transfer of responsibility for pensions post-1998 from the Commissioners to the dioceses. And, of course, the dioceses are financed to a great extent by the parish share system, which is slowly killing many weaker parishes. This situation is only going to get worse until the Commissioners share the responsibility for pension liabilities after 1998.

The Commissioners have done so well in part because the dioceses (and parishes) have done so badly.

Posted by: Froghole on Wednesday, 18 May 2016 at 11:58pm BST

Andrw Chandler not Andrew Young froghole.

Posted by: Perry Butler on Thursday, 19 May 2016 at 7:53am BST

Thanks, Froghole. In an age of transparency, the current situation is somewhat, hmm, obscure; I trust not intentionally so. What I would really like to have is a feeling for the order of magnitude of the annual flows between (it's a lengthy list, and no doubt incomplete): The Commissioners, the pensions body (?), the central bureaucratic bodies, the bishops, the dioceses, the diocesan trustee companies, the diocesan schools, the cathedral chapters, the cathedral clergy, the parishes, the parish clergy, the PCCs, other ecclesiastical charities, bodies like Church Army, Ch Urb Fund, missionary societies.

For example, I'd like to understand in broad terms how the chunk of money raised in my parish to cover an incumbent's salary and housing costs flows to the diocese as Share and then somehow back as a Ch Comm cheque to the incumbent, the pension fund etc.

Posted by: american piskie on Thursday, 19 May 2016 at 8:50am BST

american piskie: let's take a simple one -- the relationship between your parish share (or whatever it's called in your diocese) and the stipend paid by the Ch Comms.

The Ch Comms act as a central body that legally pays the stipends of stipendiary clergy, and collects tax and national insurance on behalf of HMRC. Each diocese is responsible for telling the CCs what to pay each individual, and for transferring the appropriate sum to the CCs to cover the total diocesan bill that month. If a diocese does not transfer enough money then the stipends will still get paid, but the CCs will charge the diocese interest on the sum not paid. This keeps the clergy happy (because they still get paid) but the diocese has to cough up more money in the longer term. Which is why dioceses tend to like parishes to pay their Share in equal installments rather than leaving most of it to the end of the year.

Of course, not all the parish share goes to the CCs to cover stipends. Some of it will cover the diocesan office costs, some will cover clergy housing costs, some will cover pension payments, and so on.

Posted by: Simon Kershaw on Thursday, 19 May 2016 at 5:18pm BST

Thanks, Simon Kershaw.

You can see that what I really want is a gigantic directed graph with appropriately weighted edges, with the sinks and the sources clearly marked!

Posted by: american piskie on Thursday, 19 May 2016 at 5:49pm BST

AP, London diocese provide some information of some of the distribution of money from parish giving here :

But that's far from a comprehensive explanation of how even a single diocese operates.

Posted by: Alastair Newman on Thursday, 19 May 2016 at 8:51pm BST

The C of E system as described by Simon Kershaw seems unusually centralized to me. Is that normal across the Communion? Certainly here in Canada, as far as I know it's usually done at a diocesan level, and I worked in one diocese where clergy were on local payroll (i.e. paid by the parish treasurer).

Posted by: Tim Chesterton on Monday, 23 May 2016 at 10:27pm BST
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