Church of England Defends Investments in Hedge Funds
The Church of England has more than doubled its investment in hedge funds over the last two years, but a spokesperson said the church never puts money into the notorious industry without "rigorous ethical criteria."
With a nearly $8.7 billion portfolio amounting to about 10 percent of its capital, the church has become one of the U.K.'s largest investors in hedge funds, Financial Times reported Friday in the run-up to a General Synod meeting scheduled for Monday.
Investing ethically has been a contentious issue at the meetings of the church's governing body. However, a spokesperson told the business newspaper that hedge funds are "carefully selected" after rigorous ethical considerations.
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It's an industry that pays unmatched packages to its traders and is known for its lack of transparency. But the church needs to access a range of asset classes and that means buying investment management skills from the market, the unnamed spokesperson said. The church, he added, would only pay high fees if the manager's investment skills merit them.
The church maintains that it does not invest in any fund that can cause commodity prices to go up or down or lead to fluctuations in currency markets.
A hedge fund can undertake a wider range of investment and trading activities than other funds. It is open for investment only from particular types of investors, typically institutions, specified by regulators. The church's commissioners who manage the portfolio include Archbishop of Canterbury Rowan Williams and Archbishop of York John Sentamu.
Hedge funds helped the church to recover from a financial crisis in 2008 when it suffered losses of about $1.5 billion. The church endowment gained over 15 percent in value in 2009 and 2010.
The spokesperson admitted that many of the beneficiaries of the hedge funds were wealthy individuals, but adding that many of them were generous philanthropists. "If we're asked as a Church about the responsibilities of wealth, our answer is: 'Be generous with the wealth you have been blessed with.'"
Because hedge funds are not sold to the public, the funds as well as their managers are normally less regulated than other funds and their managers. The commissioners of the Church of England reportedly lobbied the European Union in 2009 when a tighter regulation of hedge funds was planned.
