Assets managed by the Church of England Pensions Board grew 21.2% in 2016, the strongest return since performance began being recorded in 2003.
The board managed £2.3 billion ($3 billion) in assets as of Dec. 31, up 23% vs. 2015, when the return was 2%.
The London-based board runs four pension funds: Church of England Funded Pensions Scheme, Clergy (Widows & Dependents) Pension Fund, Church Workers Pension Fund and Church Administrators Pension Fund.
Most assets across the pension funds are pooled for investment purposes "to allow the smaller schemes to access economies of scale and investment opportunities which might not be available to them otherwise," said board's annual report. The pools are split into two portfolios: a return-seeking pool and a liability-matching pool.
Last year, a new asset allocation was implemented for the return-seeking pool, which reduced the equity allocation and removed a bias toward the U.K. market. The changes increased allocations to "investments that rely more on contractual income and that are less liquid," including infrastructure and private debt. "This move was made to increase the diversity of the assets and reduce the volatility of the pool's valuation."
The pool is run by 16 money managers across nine asset classes. The allocation as of Dec. 31 was 55% global developed market equities; 11% real estate; 10% small-cap equities; 6% emerging market equities; 5% infrastructure; 5% global tactical asset allocation hedge funds; 4% emerging market debt; 3% private loans; and 1% cash. In 2015, global equities had a 56% allocation; U.K. equities accounted for 17% of the investment allocation; and real estate was 11%. The GTAA allocation was 5%, while cash and infrastructure accounted for 4% each of the allocation. The remaining 3% was allocated to fixed income.
Jonathan Spencer, chairman of the pensions board, said in a statement accompanying the report that the board in 2016 played a key role in developing the Transition Pathway Initiative. It's a joint program by the National Investing Bodies of the Church of England and the Environment Agency Pension Fund that helps investors make informed judgments about how companies with the biggest impact on climate change are adapting their business models to prepare for the transition to a low-carbon economy. "Its development was a significant international intervention by the church investors, and attracted the support of other asset owners and funds that together have over £2 trillion in assets under management. We will be using the TPI analysis to engage with companies," he said in the statement.
