The investment arm of the Church of England posted a 5% return in 2022 despite the significant economic and geopolitical challenges of the past year.

The Church Commissioners for England, which manages the Church of England’s endowment fund, delivered a 5% return in 2022. This was below its target of 4% above the Consumer Prices Index (CPI) including owner occupiers’ housing costs which it attributed to inflation reaching a 40-year high.

Its 2022 return was also significantly lower than the 13.3% return it generated in the previous year.

However, the average annual return over the past 30 years has nudged up to 10% from 9.9% the previous year, exceeding its target of 4% over three, five, 10, 20 and 30 years, it said. It added that over the past 10 years, the fund had achieved an average return of 10.2% per annum.

Since 2005 the Church Commissioners managed to grow its non-pensions distribution at “more than double” the rate of inflation, due to strong investment performance, according to its full-year results.

Despite a “very challenging environment for financial markets” it said 2022 marked the 14th year in a row the Church Commissioners delivered a positive return.

It also issued its inaugural bonds in July 2022, made up of a £250m (€288m) sustainability bond with a 10-year maturity and a £300m conventional bond with a 30-year maturity. It said the money raised will be invested on a long-term basis, enhancing the fund’s capital efficiency, and offering the potential to generate additional value for beneficiaries.

Alan Smith, first church estates commissioner, said: “Our aim is to support the mission and ministry of the Church of England through providing as much funding as we can on a sustainable basis, year in, year out, come rain or shine – and achieving these returns in a year of double-digit inflation, an unprecedented cost-of-living crisis, and Russia’s invasion of Ukraine, is truly a testament to the skill and dedication of our investment professionals.

As a result of our consistent strong returns over the long-term, we were able in 2022 to announce an increase in our distributions to the Church to £1.2bn over the next three years, a 30% increase over the previous three-year period.”

Tom Joy, chief investment officer, added that the focus for Church Commissioners is on the long term.

He said: “Our genuinely diversified approach allowed us to be resilient in the face of strong economic headwinds in 2022.

“Considering that equity and fixed income markets were under considerable stress, this is a very creditable result – and marks the fourteenth consecutive year of positive returns.”

Read the digital edition of IPE’s latest magazine