I am not surprised that the church has proved such a canny investor of late, partly because the First Church Estates Commissioner with ultimate responsibility for the fund is none other than former Investors Chronicle editor (1970-77) Andreas Whittam Smith (who, you will also remember, went on to successfully found the Independent newspaper in 1984). When I read his update in the Church Commissioners annual report, I recognised many of the approaches as ones that we continue to espouse at the IC. That Mr Whittam Smith through his investment team is now walking the walk and putting those principles into practice is all the more impressive, but it just goes to show that they work.
So, on with the lessons, and the first is that setting sensible targets is a good starting point for all investors. The 5 per cent real return may not sound overly ambitious, but it is realistic and by placing emphasis on capital preservation and consistency means the commissioners aren’t tempted into taking unnecessary risks. Yet more often than not they still beat their own targets.
The fund, as Mr Whittam Smith points out, hasn’t always been like this, making many duff property investments in the property development boom of the early 1990s. But it has learned from this, broadening its still significant property exposure and also adopting a much more diversified approach to asset allocation, just as we recommend our readers do. Strong returns from the active managers that run much of its equities exposure also chime with our view that the active versus passive debate has been oversimplified, and that stockpickers can still add significant value, especially contrarian ones.
The final lesson is that if you want to invest ethically you do not have to sacrifice returns. Received wisdom is that by excluding sin stocks – as the fund does – you give up the superior returns that can be accrued from exploiting the foibles of human nature. The fund’s investment performance this year suggests otherwise. And although our whole-of-market view means we are less discriminating, we are not put off by the ethical label, either, and in fact our new Top 50 ETFs features a new category this year, ethical ETFs, some of which have beaten their generalist counterparts in the recent past.
