Church Commissioners gains 10.4% in 2020 as equities, timber deliver

Church Commissioners for England, London, recorded a 10.4% investment return in 2020 driven by equities and some alternative assets, as its portfolio proved resilient to the coronavirus pandemic.

The pension fund said in a financial report published Tuesday that its investment return in 2019 was 10%. The fund's annual return over 10 years was 9.7%, above its target return of 9.5%.

Assets grew by 4.6% to £9.1 billion ($12.4 billion) at the end of 2020 from £8.7 billion at the end of 2019.

The fund's public equity portfolio, which constitutes 35.6% of assets, returned 18.3% as global equities benefited from the policy response to COVID-19, the report said.

The private equity and venture capital portfolio achieved a total return of 33.6% in the 12 months to Dec. 31. The private equity portfolio constituted 9.5% of all assets. The size of the venture capital portfolio was not provided.

The fund's credit portfolio, which is 4.7% of all assets and consists of global high-yield bonds, emerging market debt and structured credit, returned 7.6%.

The timber portfolio delivered an "exceptionally strong return" of 41.3% during 2020, the fund said. The fund invests 4.7% of its assets in timber.

The strategic land portfolio, which accounted for 2.9% of assets, delivered a return of 3.7%

Value-linked loans, at 0.9% of the fund's assets, returned 2.1%.

However, other real assets recorded losses in 2020. Commercial real estate delivered a negative return of 12.8% in 2020. The exposure was 2.9% of the fund's assets.

Indirect real estate had a loss of 8.7% in 2020. The fund allocated 1.2% of its assets to indirect real estate.

Infrastructure, accounting for 0.9% of the fund's assets, delivered a negative return of 4.1% in 2020.

The fund also invests 9.9% of its assets in cash and equivalents, 7.5% in defensive equities, 7.3% in multiasset strategies, 6.5% in farmland, 5.3% in residential real estate and 0.2% in currency hedging strategies. Returns for these strategies were not provided.

The Commissioners, in partnership with the Archbishops' Council, also provided £130 million of immediate liquidity support to churches, following a decline in income during the COVID-19 lockdown.

The report also showed that, in April, the Commissioners announced an interim goal to reduce the carbon intensity of the investment portfolio by 25% by 2025. The fund said it will divest holdings in fossil-fuel companies that are not demonstrably on track to achieve climate change targets that are aligned with Paris Agreement by 2023.