Church of England faces investment gloom

By staff writers
6 Nov 2008

The Church of England is expected to be praying for a big interest rate cut this morning from the Bank of England, as it faces further gloom over its investments.

The Church Commissioners had £13m invested in Man Group at the end of last year, the largest listed hedge fund manager. However, this morning the company was down 30% in early trading after its profits slumped - potentially wiping £4 million off the value of the Church's investment, overnight.

The Commissioners have announced an average return on the Church of England's investments of just under 10% a year over the last ten years. But most of its investments are in property and equities, which have both taken a hammering over the last year as markets have fallen, meaning that the next set of annual figures are unlikley to be so rosy.

The Church raised its stake in both types of investment in 2007, although last year its investments in shares lagged behind the performance of the stockmarket as a whole by about 3%.

In order to offset its risky investments abroad, the Church has also set up a currency hedging programme to short-sell the British pound. But its extensive property portfolio, which includes investments ranging from new shopping centres and retail warehouses to apartments in Manhattan looks likely to take a battering.

Despite an Ethical Advisory Group which helps the Church make its investment decisions, the Church's largest shareholdings have been in oil companies, and included at the end of last year £180 million in Shell, and £144 million in BP. Both benefitted from the speculation which drove up oil prices to around $160 dollars a barrel, but have declined since the beginning of the year by close to 20% - potentially losing the Church £65 million.

The Church was also heavily exposed to banks, specifically HSBC (£125 million) Royal Bank of Scotland (£60 million) Barclays (£40 million) Lloyds TSB (£36 million) and the ill-fated HBOS (£35 million) whose share price is now a staggering 90% lower than it was at the beginning of the year.

Mining companies are another big investment for the church, with £70 million invested in Rio Tinto and £53 million in Anglo American last year. Both benefitted from surging commodity prices fuelled by speculation, but with the threat of a global recession the share price of both have halved since the beginning of the year - potentially losing the church £60 million.

The Church's third biggest equity investment in Vodafone (134 million) looks likely to bring the Church its single biggest loss, having declined 40% since the beginning of the year, potentially losing the church over £50 million.

The Archbishops of Canterbury and York hit the headlines recently after they criticised city traders for short-selling and speculative investments.

The Church's major shareholdings as of 2007 (value in £ millions):

Royal Dutch Shell 179.4
BP 144.3
Vodafone 133.7
HSBC 125.6
GlaxoSmithKline 87.2
Rio Tinto 70.7
Royal Bank of Scotland 59.3
Legal & General All Stocks Gilt Fund 58.7
Capital International
Emerging Markets Fund 55.3
Anglo American 53.3
BG 53.2
Fidelity Institutional
Emerging Markets Fund 52.1
Tesco 48.0
BHP Billiton 47.5
AXA Global Emerging Markets Fund 47.2
Astra Zeneca 43.3
Barclays 40.4
Lloyds TSB 35.8
HBOS 34.5
Xstrata 33.2
Standard Chartered 32.7
Unilever 30.7
National Grid 27.0
BT 27.0
Reckitt Benckiser 26.1
Prudential 23.4
Aviva 23.2
Scottish & Southern Energy 19.5
Centrica 17.4
Cadbury Schweppes 15.9
Exxon Mobil 15.7
Nestle 14.9
Arisaig Asia Fund 13.9
Man 13.0
Old Mutual 13.0
Marks & Spencer 12.2
Microsoft 11.8
Reed Elsevier 11.7
Legal & General 11.6
General Electric 10.7
Morrison (Wm) Supermarkets 10.5
Roche 10.3
Genesis Emerging Markets 10.1

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