From One Devil To Another -Church of England doubles investment with under-fire hedge funds

THE Church of England has more than doubled the amount of cash its multi-billion pound endowment has invested in hedge funds, it emerged yesterday.

Despite the public anger over corporate excess, the Anglican church’s £5.5 billion portfolio, managed by its commissioners, is now one of the largest UK investors in an industry that has been roundly criticised for its enormous pay packages. 

Today around 10 per cent of the church’s capital is invested with hedge funds compared with just four per cent at the end of 2009.
So far, hedge funds have brought a good profit for the church, although there have been reservations expressed about the organisation’s involvement in them. 

In the past, the church’s ruling body the General Synod has seen heated debates about corporate greed. Church finances and clergy pensions have also been hot topics.

Last April, the Church Commissioners informed companies in which they held shares that they would vote against awarding bonuses in excess of four times their annual salary to executives. The church has acknowledged its unease over the bumper salaries and bonuses paid to hedge fund managers. Payouts for hedge fund managers can run into tens of millions of pounds.

A Church spokesman said: “We don’t like high fees any more than other institutional investors. But we need to access a range of asset classes and that means buying investment management skills from the market.

“We will only pay high fees if the manager’s investment skills merit them.”

The spokesman emphasised that the Church of England only invested in “carefully selected hedge funds” that met its rigorous ethical criteria. 

The commissioners are led by a body that includes Rowan Williams, the Archbishop of Canterbury, and John Sentamu, the Archbishop of York, and the Prime Minister.

They began increasing its hedge fund investment in 2010 to diversify the church’s portfolio and continued to invest in the sector last year. In recent times the church has proved successful when it comes to its investments and is recovering from the £1 billion losses it recorded in 2008. 

In 2009, the church’s endowment gained 15.6 per cent in value and 15.2 per cent in 2010.

In his most recent annual report the church estates commissioner Andreas Whittam Smith said that hedge funds had “proved their worth during the financial crisis”.