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Interview: Tom Joy, chief investment officer, Church Commissioners

23 February 2024

‘I believe that the Commissioners should be an engaged owner of business’

I’ve been in finance all my working life. Like many young people, I didn’t know what I wanted to do when I went to university; so I studied economics, the subject I enjoyed the most at A level, and was fortunate to be offered a scholarship to study for a Master’s. It was then that I started to focus on joining the City, and specifically investment management. I was lucky to be selected for a graduate training programme, and started in 1995.
 

I feel very lucky, and haven’t looked back. I joined the Commissioners in 2009 as their first-ever CIO [Chief Investment Officer]. I was attracted by a pure investment role, running one fund for one client, a client that meant a lot to me personally, spanning a broad range of asset classes, both public and private markets, with limited liquidity constraints. This is very rare in the UK.
 

You need curiosity, and a relentless drive for continuous improvement — combined with a healthy dose of humility.
 

You also have to be comfortable being away from the crowd, following your own path. There’s always the temptation to chase the latest fashionable trend. There’ve been many examples where bubbles have been formed by investors piling in on the back of recent strong performance, like the internet bubble in the late 1990s, the global financial crisis in 2007 and 2008, fixed income and bonds in the aftermath of the global pandemic. . . As the saying goes: “Past performance is no guide to future performance.”
 

Ultimately, investment is a people business; so our success is down to the hard work of my amazing team, as well as the assets committee, which oversees our work. On top of this, you need good governance, which is really the foundation stone, and a clearly articulated investment philosophy that you stick to religiously.
 

I wouldn’t say there is a routine: work is quite varied, which I love. As we have a very global portfolio, I’m often travelling. Outside of work, I still play sports and try to keep fit, and make time to keep up with all my children’s varied pursuits.
 

I’ve had great members of the assets committee over the last 14-plus years. They supported me putting in place the jigsaw pieces of governance and process. These are the critical inputs that have allowed us to deliver strong results.
 

We’ve delivered 14 years of positive returns, and we’ll release our 2023 results shortly after I have left. I am proud not just of the level of returns, but their consistency. This has allowed us to grow our distributions and support for the Church substantially.
 

In terms of specifics of the investment strategy, I’d note three factors. One is going global. When I arrived, the portfolio was heavily weighted to the UK. I felt there were better opportunities overseas, and that proved correct. The second is the increase in allocations to private markets, like private equity and venture capital. When I arrived, these were minimal. Now, they are over 15 per cent of the portfolio, and, combined, they’ve returned almost double what our public equities have in the last ten years. The third is introducing alternative asset classes, like forestry and infrastructure, within real assets, at the expense of more traditional property assets. These have performed very strongly, too, compared with UK commercial property.

The investment world’s changed a lot. The biggest changes have been the rise of passive investments. These simply track an index, and invest in every single company in line with their weighting on the index. Beating the market isn’t easy, and tracking an index is low-cost; so it’s a very attractive proposition. But, if it grows too big, then it hinders price discovery and puts more and more money into big companies. Also, we’ve seen the growth of alternative-asset classes, and, in the UK in particular, the shift away from defined-benefit pension schemes to defined-contribution plans.
 

I’m pleased that we’ve not only delivered strong financial results, but we’ve done so while remaining at the global forefront of responsible investment. Our reputation is very strong, and I’m very proud that we’ve proved that these two objectives can be achieved simultaneously.
 

I am also proud of the fact we issued the Commissioners’ first-ever bonds in 2022, which was a big effort across teams at Church House. I think of this as trying to do things today that will benefit future generations. Because of our strong credit rating, we were able to borrow for 30 years at a fixed rate of just over 3.5 per cent. The proceeds will be re-invested in the fund, and I’m confident we can earn a return over the next 30 years which is higher than 3.5 per cent. Then we can grow distributions for future generations by more than would otherwise be the case.
 

I am also very pleased that we’ve been able to grow our distributions materially above the level of inflation, culminating in the current triennium, with our largest-ever increase of about 30 per cent.
 

I believe that the Commissioners should be an engaged owner of business. That said, divestment must always be an option, and a credible last resort if we don’t see changes we need. I’d argue that, when we don’t see that change, it means the financial risks are also elevated; so divestment is often for both ethical and financial reasons, just like our recent divestment from many oil and gas companies.
 

The mandate of the Church Commissioners is very clear, and derives from our obligations as a steward of charitable funds. We’re required to seek the best return which we reasonably can for our beneficiaries, acting prudently, and we don’t make concessionary investments. Under charity law, we have a mandate to maximise our investments, even in hard cases: it’s pretty simple and clear-cut.
 

But we do make impact and concessionary grants in partnership with the Archbishops’ Council, and some are used to make investments where the primary purpose is the impact delivered rather than the financial return. The Commissioners give money as a grant, and the Church decides what it goes towards. When a grant is spent out, it’s spent out, but, if it is invested for some return, it can be recycled. For example, the Archbishops’ Council has made an investment in a fund that provides homes for vulnerable women who are victims of domestic abuse or who are leaving prison.
 

There is a clear separation between these investments and the investments that the Commissioners’ fund makes. It is important that, when the Commissioners’ fund does well, the Church as a whole can do more.
 

Financial markets can help provide solutions to some of the key issues we currently face. For example, the transition to a clean economy is reliant upon a large allocation of private capital to clean energy. The issue isn’t so much competing stakeholder interests, but rather ensuring that the enabling environment allows various stakeholders’ interests to align.
 

I’m proud of the Church Commissioners’ interrogation of their historic links to transatlantic chattel slavery. It’s an act of responsible investment. It’s essential to learn from your past, to understand how it has shaped your present, so that you can learn, act, and invest for a better future for all, avoiding repeating past mistakes. We determined the facts about our history through market mechanisms — forensic accounting, risk-management disclosure, and incorporation into our 2022 bond issuance due-diligence process with prospective investors.
 

There’s consensus across key global financial authorities, from the Bank of England to the IMF and World Economic Forum, that climate change is one of the biggest threats to global economies. The challenge is getting the whole global community to move at the speed required to meet the science. That said, the uptake in renewables in the past few years is very promising.
 

When I think about my childhood, I have only happy memories. I had very loving, encouraging, supportive parents, and I owe them enormous gratitude. Now I have four children of my own.
 

I was brought up Catholic. My mother had a strong faith, and we would go to church on Sundays regularly from a young age. I chose to join the Church of England in my early twenties.
 

I guess the best I can say about the way my faith’s developed is . . . sporadically.
 

I’m a fairly relaxed person; so I don’t tend to get angry that easily, which, I think, is important. When we think about what makes us angry, often it’s not worth it.
 

Spending time with my family and sports are what make me happiest.
 

As a keen sportsperson, I would say any bat-on-ball sound is the best, or the sound skis make as they carve through snow.
 

I do believe in human ingenuity; so that always gives me hope.
 

I pray most for our leaders to choose a path of compromise rather than a stand-off or conflict, as so often these days.
 

Of course, I could rattle off lots of famous historical figures that it would be fascinating to spend a few hours locked in a church with, but I kept coming back to one person: my mother. She passed away 20 years ago, almost to the day, and I would choose her. She missed the birth of her first grandchild by about two weeks.
 

Tom Joy was talking to Terence Handley MacMath.

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