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Investment Update

Perspective

Spring 2017

Roger Sayler, Chief Investment Officer

Investment Update

As of December 31, 2016, The Church Pension Fund’s (CPF) investment portfolio assets were $11.9 billion, slightly higher than they were a year earlier ($11.6 billion). This amount includes $180 million in assets for The Episcopal Church Lay Employees’ Retirement Plan, which is slightly higher than a year earlier ($172.4 million).

CPF’s investment results for the three-year and five-year periods ending December 31, 2016, strongly exceeded our global stock/bond benchmark, earning an annualized return of 5.5% and 8.4%, respectively. While past performance does not guarantee future results, our financial position remains strong as we continue to focus on the long term. We regularly use sophisticated financial modeling to stress-test our financial position under various scenarios. This exercise helps confirm that we continue to have the appropriate level of assets to meet current and future obligations under the benefits programs we offer.

New Investment Options

In addition to managing CPF’s assets, our Investment Department regularly reviews the investment options we make available to individual clergy and lay employees through The Episcopal Church Retirement Savings Plan and The Episcopal Church Lay Employees' Defined Contribution Retirement Plan.

As a result of their most recent review, we decided to make the following changes to the investment lineup:

  • We replaced the Domini Social Equity Fund with a new socially responsible equity manager, Dimensional Fund Advisors (DFA) U.S. Sustainability Core 1 Portfolio.
  • We replaced the Fidelity Dividend Growth Fund with the Fidelity 500 Index Fund.

DFA’s U.S. Sustainability Core 1 Portfolio, which has lower fees than the Domini Social Equity Fund, is an enhanced index strategy with the ultimate goal of incorporating both environmental and social attributes without sacrificing sound investment principles. The fund strives to deliver excess returns over a broad index of U.S. equities, while maintaining dramatically less exposure to companies emitting excessive greenhouse gasses and those that have large carbon reserves, as well as taking into account other sustainability considerations. The Fidelity 500 Index Fund is an existing low-cost investment option that broadly invests in large-cap stocks.

These changes took effect on February 28, 2017. No action was necessary for participants in either plan, as all existing balances and future contributions were transferred to the new investment options unless participants decided otherwise.

Socially Responsible Investing Update

We completed a number of socially responsible investments in 2016. Our recent investment with Developing World Markets (DWM) provides renewable energy finance loans to social businesses in the developing world.

In this transaction, CPF served as an anchor investor in DWM’s $60.8 million Off-Grid, Renewable and Climate Action Impact Note. CPF and Wespath Benefits and Investments, a general agency of The United Methodist Church, invested $60 million ($30 million each). You can read the complete press release here.

This transaction follows two significant socially responsible commitments by CPF, with the Cheyne Social Property Impact Fund and the Avanath Affordable Housing Fund, in early 2016. Today, CPF has socially responsible holdings in 23 countries, bringing our current total commitment to socially responsible investing to nearly $1 billion.