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Church of England pension fund assets jump 13% in 2014

Canterbury Cathedral

Total assets managed by the Church of England Pensions Board, London, increased 13% to £1.82 billion ($2.83 billion) for the year ended Dec. 31, thanks in part to an 18.1% return from the board's liability-matching investment pool.

The board, which provides retirement services for those who have served or worked for the church, is the trustee and administrator of the Church of England Funded Pensions Scheme, Clergy (Widows & Dependents) Pension Fund, Church Workers Pension Fund and Church Administrators Pension Fund.

The majority of assets are managed across a common investment fund, the Church of England Investment Fund for Pensions, which is split into two investment pools, a return-seeking pool and a liability-matching pool. The return-seeking pool had £1.39 billion of assets, and the liability-matching pool had £287 million of assets, as of Dec. 31, according to the board's annual report.

The return-seeking element, which has a 58% allocation to global equities, 19% to U.K. equities and 10% to real estate — the investment pool's three highest allocations — returned 8.5% for the year ended Dec. 31, vs. a benchmark return of 8.1%. This benchmark is a consolidation of all manager benchmarks in the investment pool. In aggregate, assets invested across these pools returned 9.7%.

The liability-matching portfolio has a 77% allocation to index-linked government bonds, and the remaining 23% is invested in corporate bonds. The portfolio returned 18.1% in the year, vs. 19.2% for its benchmark.

“A common theme of the board's work in 2014 was 'taking risk off the table,'” said Jonathan Spencer, chairman of the pension board, in the annual report. “We have taken decisions to create a more stable environment for our two largest pension schemes, as well as ensuring that our retirement housing provision will be sustainable for future generations.”

The board completed a buy-in of a portion of liabilities in the defined benefit section of the clergy fund in March, and further derisked the £1.26 billion Funded Pensions Scheme. As of Dec. 31, the Funded Pensions Scheme held 83.3% of its assets invested in the return-seeking pool, down from 94.7% a year earlier. The remaining 16.7% was in the liability-matching pool.

The board said in the report it would look to extend its commitments to infrastructure in 2015 and will “investigate increasing our investment in illiquid asset classes for the return-seeking pool.” Infrastructure now accounts for 3% of the return-seeking pool.