Investing lessons from the church of England

A church service in Nyeri . FILE PHOTO | NMG
A church service in Nyeri . FILE PHOTO | NMG  

A quick glance at the revenue streams of some of the leading churches in the land shows a rather uninspiring picture: on average more than 70 per cent of the income comes from tithes, offering and associated gifts while a tiny sum comes from investment sources.

But before moralists and their opposing neighbours (Mormons) cast their first stones, let me present to you a shining star who’s found a great balance: the Church of England.

Skimming through its 2016 annual investment report released last month, I was pleasantly surprised. Not only were the results impressive (17 per cent), but had by far outstripped most similar funds as well as the Dow Jones and S&P 500 indexes.

Even more impressive, the Sh9 trillion endowment fund distributed a total of Sh30 billion to help fund the church activities, clergy pay and pension payments last year.

The amount catered for 15 per cent of the Church’s overall mission and ministry costs.

Its long-term performance is also quite remarkable. Over the past 10 and 20 years, they returned 8.3 per cent and 9.5 per cent respectively.

Going back three decades, the returns averaged 9.6 per cent compared to a benchmark return of 8.3 per cent — a target return of 5 per cent per annum above inflation.

What’s notable is that, all this was achieved despite excluding sectors such as tobacco, alcohol, gambling, weaponry or pornography, high interest lending and other “sinful” sectors.

It’s worth noting that the fund stewards are guided by an ethical investment policy, which dictates that all investments should be compatible with the Church’s Christian values.

Putting praise aside, here’s the great takeaway. First, if our churches care for a sustainable financial future, they’ll need to ramp up their investing activity and begin diversifying.

And learning from the mother church of the Anglican Communion – The Church of England boasts a well-diversified fund, more than a third of the portfolio is invested in stocks, about a third is in property and the rest is apportioned between alternative investments (private equity, timber, infrastructure and cash), establishing endowments fund will be a great start.

Secondly, as a perpetual endowment, churches have the luxury of being able to overcome the illiquidity in alternative investments such as property and commodities like gold and silver.

In other words, the church can comfortably take decisions that may not pay off for years.

Lastly, through investment funds, the church can help improve the Kenyan investment landscape (think corporate governance). Again, the Church of England is known to have a firm commitment to stewardship.

It votes all the shares in its portfolio. Last year alone, it made use of its shareholder rights to block unjustified company pay.

Truly, our churches have a great example to emulate.

They need to up their investing game. And no one said it better than the wisest king that ever lived; King Solomon, “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” (Ecclesiastes 11).