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Church Commissioners announce ‘modest positive return’ in 2023

05 June 2024


Apple was among the Commissioners’ top-20 holdings

Apple was among the Commissioners’ top-20 holdings

THE Church Commissioners achieved a 4.1-per-cent return on their investments in 2023, down from five per cent the previous year, their annual report, released on Tuesday, says.

The total endowment fund was valued at £10.4 billion at the end of 2023 — up from £10.3 billion at the end of 2022 (News, 2 June 2023). The Commissioners’ ongoing target is to match or exceed a return of four per cent above inflation (CHPI) p.a. The average over the past ten years has been nine per cent.

In these percentage terms (which are not set against a benchmark), the portfolio has had a positive return for the past 15 years.

The report says: “The strong environment for equity markets helped us deliver a modest positive return. Our fixed income allocation, which is now a bigger part of the fund, also performed well. . . While our public market allocations helped performance, our private markets and real asset portfolios were a drag on returns in 2023. In private markets, falling valuations and currency headwinds led to weak returns, particularly venture capital.”

The Commissioners’ financial activity is divided between several portfolios. Returns are set against an asset-class-level benchmark, which the Commissioners have chosen not to publish. (As they are not a regulated, listed fund with equity investors, they are not obliged to do so.)

The public-market portfolio did not keep pace with an AI-related boom in the global equity index last year, the report says, returning 11.7 per cent. (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla accounted for 40 per cent of the global- equity-index return.) As of December, Alphabet, Amazon, Apple, and Microsoft were among the Commissioners’ top 20 holdings.

The absolute-return portfolio (returns largely independent of the external environment) represented about 11.8 per cent of the fund. In 2023, it returned 6.3 per cent, which, the report says, “provided a useful contribution at a total portfolio level and was a good performance given the strength in sterling”.

The allocation of fixed income — which, for most of the past 15 years, has been “very low” — was increased with higher interest rates, and returned 8.3 per cent.

The “drag on returns” — the private-equity and venture-capital portfolios, totalling £161 million and £23 million respectively, which invest in unlisted companies — achieved total returns of just 1.2 per cent and a negative return (–12.7 per cent) respectively in 2023.

Real assets — property-related investments — also delivered a negative return of (–0.5 per cent) during 2023. The best returns in the portfolio were commercial and value-Linked Loans investments: 11.2 per cent and 10.6 per cent respectively.

The total return on the endowment fund is derived from both income and gains on investments. Total income for the year was £192 million (up £43.6 million from £148.4 million in 2022). Total gains on investment assets were £345.1 million (down from £413.1 million in 2022).

Last year was the first of a new funding triennium (2023-25) for the Commissioners. The funding, totalling £1.2 billion, represents an increase of about 30 per cent over the last triennium. Of this, £400 million has been allocated to the Strategic Mission and Ministry Investment programme (SMMI).

SMMI is a new stream through which the Archbishops’ Council allocates funding to dioceses (News, 18 March 2023). It replaces Strategic Development Funding (SDF), Strategic Capacity Funding, and Strategic Transformation Funding. It includes a £338.5-million Diocesan Investment Programme for the current triennium, comprising £100 million of Lowest Income Communities Funding (News, 7 November 2019), and a remaining £240-million fund, for which all dioceses can bid. Bids must be in line with the Vision and Strategy priorities for the 2020s.

The latest annual report states that the funding of bishops’ and archbishops’ ministry increased from £44.9 million in 2022 to £47 million in 2023, largely owing to the refurbishment programme at Lambeth Palace. Total expenditure on clergy pensions also increased, from 117.1 million in 2022 to £120.6 million in 2023, as did charitable expenditure (excluding clergy pensions): up from £186.8 million in 2022 to £223 million in 2023.

The latter includes a proportion of payments to support dioceses and parishes: this was up from £117.2 million in 2022 to £152.8 million in 2023. Cathedrals ministry was down slightly in this period, from £14.3 million to 14.1 million.

Writing in a foreword to the report, the Archbishop of Canterbury said that conflicts and crises around the world, including those in Gaza and Ukraine, had made the Commissioners’ stewardship of the endowment fund “ever more complicated”. And, because of food insecurity, child poverty, and the housing crisis in the UK, he writes: “Ethical investment, never simple, is ever more difficult. The climate crisis casts a deep shadow over investments (not to mention human lives) over the next 25 years.”

One year ago, the Commissioners and Pensions Board announced that they would be removing Shell, BP, and other oil and gas companies from their investment portfolios, because those companies were not reducing their carbon emissions quickly enough (News, 23 June 2023). After a 2018 General Synod motion, the Commissioners committed themselves to disinvesting from fossil-fuel companies by 2023 unless the latter could prove that they were on the path to tackling climate change, in line with the Paris Agreement (News, 13 July 2018).

At the start of last year, the Commissioners pledged £100 million to create an investment fund that would ultimately aid communities harmed by transatlantic chattel slavery (News, 10 January 2023). This followed a process of analysing the extent to which Queen Anne’s Bounty, part of the endowment now managed by the Church Commissioners, had been invested in the slave trade.

An Oversight Group was set up, and a global survey was conducted. Its findings were published in March; the Commissioners announced that they would be seeking partners to increase the fund to £1 billion (News, 8 March).

Archbishop Welby’s foreword also includes a defence of this. He writes: “Our response is not about compensation for individuals. The people who suffered these horrors are long gone – their lives blighted, brutalised, and cut short — and nothing can erase the pain they endured. For the Church Commissioners, this is about seeking the truth, taking responsibility, and living up to its values. Neither is it about apologising for spreading the gospel, as some have claimed — nothing could be further from the truth. It is our calling to share the good news of Jesus Christ.”

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