The Church Commissioners will stop investing in UK government bonds, cut back its holdings in global equities, and invest in US timber as part of a radical new restructuring of its investment strategy.
The charity has one of the biggest UK charity investment portfolios, with a total of £5.3bn under management. Andreas Whittam Smith, first church estates commissioner, said the habit of maintaining a very high weighting in equities and real estate regardless of market conditions had served it well so far, but was no longer appropriate:
“We must now be prepared to vary our asset allocations in a dynamic fashion, albeit purposively rather than rapidly," he said. “As a result we have begun to reduce the proportions of our funds held in pure risk assets. In cutting back our holdings of equities, however, we have decided to reduce our positions in global equities rather than UK shares.”
The Church Commissioners will reinvest the released funds in the US timberlands. A number of meetings with possible managers in the US are already underway:
“Timberland has provided investors with attractive returns in relation to risk over many years,” said Whittam Smith. “Timber is a slow-growing crop with opportunities for harvesting occurring after the first five years and many years after.
“Members of the asset committee have crossed the Atlantic to meet preferred managers.”
The Church Commissioners also plan to extend its investment holdings in hedge funds which meet its ethical guidelines:
“Many of them proved their worth during the financial crisis,” said Whittam Smith. “We are already using one manager who runs an absolute return fund in which the Commissioners have a holding. Its results have been excellent.”
However, the Church Commissioners will pull out completely from UK government bonds, in which it had a low weighting in 2010:
“They are unattractive when inflationary forces are gathering strength,” advised Whittam Smith. "For in managing risk, it is as important to say 'no' as it is to say 'yes'."
The Church Commissioners for England recently announced a 15.2 per cent return on its investments during 2010, with the fund outperforming its comparator group over the past ten and 15 years.
