Church Commissioners enlists help to avoid £800m losses of last recession
The Church of England is taking steps to mitigate losses to its £5.67bn investment portfolio caused by the recession.
The Church Commissioners, which manages the church’s equities and real estate portfolio, is working with its advisers, fund managers and tenants to avoid the £800m losses it suffered in the 1990s recession.
It is also recruiting an investment director to oversee its portfolio as the markets become more complex.
It is thought that the value of the church’s property portfolio may have fallen by 35% to around £1.2bn in line with the Investment Property Databank Monthly Index, since its last valuation of £1.8bn at December 2007, although it declined to comment.
At last week’s General Synod – the church’s annual conference – Andrew Britton, chairman of the finance committee of the Archbishops’ Council, warned that 2008 would be shown to have been an ‘unprecedentedly lean year as a result of the market crash’.
The church expected a ‘significant reduction in the value of their assets following the sharp decline in equity and property markets’.
The Church Commissioners was exposed to property development and large amounts of debt in the last recession. But this time around it believes it is less vulnerable.
Church Commissioners chief executive Andrew Brown told Property Week that it was in a strong position, as it has no debt, no exposure to speculative developments, and low void levels.
‘We are not immune from the market conditions,’ he said. ‘I cannot confirm any change in our valuations, as we are going through the process of our year-end valuation, but we are in the same market as everyone else.’
He said the church’s actuaries had suggested it could continue its spending plan – which contributes about 17% of the church’s annual running costs of £1bn – until at least 2010.
However, he did say that this may include dipping into previous cash reserves that the church had saved as part of its ‘prudent’ smoothing process to ensure it maintains regular cashflow.
Brown said the church’s strategy was unlikely to change dramatically as a result of the market, and added that the new investment director’s recruitment was not a ‘panic move’ but an appointment to provide a strategic overview.
‘At every asset committee we have discussions on the current market conditions,’ he said.
‘The direction of travel during 2008 has been of diversification.
We are long-term investors but we are not complacent about the short term, and we are working with our managing agents and working very hard with the fund managers.
‘We are not looking to sell.
We are looking at investments overseas and we are looking at a number of opportunities.’