Church of England's investment fund missed targets last year as returns dropped

The church’s fund will continue to focus more on non-traditional asset classes, the boss of its investment fund said

Returns from the investment fund go towards running costs (Reuters)

The Church of England made a 7.1 per cent return on its investment fund last year, a significant reduction from the 17.1 per cent return reported in 2016, and the church anticipates a “muted” performance in the future.

The result for last year missed a target of 9.1 per cent and is also lower than the church’s average return of 9.4 per cent over the past 30 years. Investable assets grew from £7.9bn in 2016 to £8.3bn last year.

The disappointing numbers come a year after the fund was named one of the top performers across the globe, helped along by the drop in the value of sterling in 2016.

Real assets were highlighted as contributing particularly muted returns of 4 per cent last year, while property was mixed: commercial property markets offered returns of 10.5 per cent, but the church said markets including London residential and English farmland were “flatter”.

The CofE said active management in 2017 was “an important contributor to gains in public equities and real assets while bond markets were relatively weak”.

It also said sterling strength had an impact on performance, as did being globally diversified across multiple asset classes, resulting in the fund doing less well than equities markets, which were the strongest source of returns last year.

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.”

Returns from the fund account for about 15 per cent of the Church of England’s running costs each year.