The Church of England’s £8.3 billion investment fund fell short of targets last year as it was stung by the recovery in sterling against the dollar.
According to the latest financial report from the Church Commissioners, the body which manages the Church of England’s assets, figures show a total return on investments in 2017 of 7.1%.
It represents a sharp fall on last year’s 17.1% and below its 9.1% target.
The macro economic environment is changing and anticipating muted returns in the future we will continue to develop our focus on non-traditional asset classesFirst Church Estates Commissioner Loretta Minghella
Explaining the failure, the Commissioners said that while buoyant equity markets helped the fund – which booked returns of 15.9% – other areas faced challenges.
“Fixed income markets were more challenged; yield curves flattened as shorter maturity bond yields rose.
“Another important dynamic in 2017 was the recovery in sterling, mainly against the US dollar, following the collapse in 2016.
“This was a headwind for all our US dollar-based strategies and had a material impact on our overall return in the multi-asset strategies, private equity and private credit.”
The pound staged a recovery against the dollar last year after collapsing following the Brexit vote in 2016.
The Church Commissioners distribute returns from the fund into the Church of England, accounting for approximately 15% of the Church’s running costs.
In 2017, non-pension support for the Church by the Commissioners totalled £144 million, up from £108.5 million.
Overall expenditure was at £226.2 million, down from last year due to lower pensions obligations.
First Church Estates Commissioner Loretta Minghella 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.”