How Church of England CIO Tom Joy blesses his fund with 10% returns: ‘Many fund managers over-diversify’

David Wighton is a columnist at Financial News.

When Lloyd Blankfein told a reporter he was “doing God’s work,” the Goldman Sachs boss was only joking. When Tom Joy says the same thing, he means it. He is truly doing the work of God. Or at least that of the Church of England.

As chief investment officer of the £9billion Church Commissioners for England endowment fund, the former Schroders executive plays a key role in funding the institution’s 488-year-old mission. As a committed Anglican, he finds this satisfying in itself. But he also feels he has one of the best jobs in the investment industry.

“It’s one of the best pools of capital to work on in the country. This is an investment role as pure as possible. I’m not on the road to do marketing…that’s bliss,” Joy said in an interview at the fund’s offices in Church House, Westminster.

With a client who has a very, very long-term view, few constraints and no pension regulations, he admits he and his team of 60 have big advantages over many other investment managers. Nevertheless, the performance is quite impressive.

The fund has returned 9.5% over 30 years, 9.7% over 10 years and 10.4% in 2020. After the fund knocked it out of the park in 2016, its 10-year performance even outpaced the Yale University, widely regarded as one of the best-run endowments in the world. Yale has since regained the upper hand, thanks to spectacular returns in private equity and venture capital in recent years.

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Joy has increased the fund’s exposure to private equity since joining in 2009. However, it needs to be a little more cautious than US endowments due to the need to pour around £300m a year into the Church of England – about a sixth of its total running costs – which is the second largest distribution of any UK endowment after the Wellcome Trust.

This strong performance allows Joy to take a friendly look at many traditional investment managers. For starters, he doesn’t see the point of holding developed market bonds at current prices. Joy sold the fund’s relatively small bonds 18 months ago. “I was a little early but it’s a luxury we can afford.”

The fund achieves its diversification by balancing equities (which make up around 45% of the fund) with private equity and venture capital (around 10% and growing). It also has exceptionally large real estate assets, particularly forests, farmland and residential properties, all of which have performed well in recent years.

The fund has beaten benchmarks in all asset classes over the past 10 years, including public equities, where it is ahead by around 1.2%. He outsources equity management, mostly to smaller firms, but Joy is reluctant to name them: “When you find a really good fund manager, the last thing you want to do is shout them out.”

Equity management is extremely active and Joy argues that at this point in the cycle, with higher inflation, rising interest rates and lower potential returns, active management should be able to add some value.

“There are managers who can beat the market. A few of them. They usually fly under the radar and sometimes they are closed. But we are patient.

He is not committed to active management and would gladly switch to more passive funds, if that didn’t work out.

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Yet even the best active managers tend to suffer from a common problem, he thinks. “My general view of fund managers is that for business risk and business risk reasons, they over-diversify. There’s a lot of academic research to prove it.

If managers focused more on their strongest convictions, their performance would be better. Joy’s fund provides this focus by investing more money in its managers’ best ideas (without paying extra fees) – a strategy that has worked well.

Joy also enhanced fund returns by building internal capacity to increase or reduce risk using derivatives based on market conditions. It has to be done internally, he says, because outside managers would want to do things and earn fees even if, for long periods of time, it wasn’t necessary.

Another criticism Joy has of investment managers is that many don’t pay as much attention to the inner workings of running portfolios as they do to the more glamorous activity of asset picking. .

“The industry generally doesn’t recognize that your operational functions can be an alpha generator as much as they should be. There are so many areas where Nicky [Dymond], who is my COO, saves us money,” says Joy, who was paid £520,000 last year. One of the costs on which big savings have been made is legal fees – the fund has developed its in-house expertise to reduce the costs of costly external lawyers.

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A longtime leader in ethical investing, the fund has recently taken a more militant approach, including building on successful efforts to convince ExxonMobil to develop a more ambitious fossil fuel transition strategy. Joy says that because of her status, the Church can have a disproportionate impact.

“Our voice is sometimes more powerful than the size of our fund. Building coalitions and committing to effect change is really where we can play. »

Although the Church has a list of investment areas it avoids and has told its leaders to sell all of its £20m of Russian assets, Joy strongly believes that engagement is more powerful than commitment. exclusion. And when it comes to investing in ESG investments, the focus is more on impact than portfolio purity. For example, the focus on green infrastructure is the creation of new assets, whether battery storage projects, electric vehicle charging networks or wind farms.

Outside of work, Joy’s passion is sport, including playing cricket for her local team in the Candover Valley in Hampshire. The pitch is very close to the village church and he makes sure the batsmen know that if they knock tiles off the roof they will have to pay. Otherwise, his fund could end up footing the bill.



May 1972



Taunton School


BSc Economics, MSc International Economics, Cardiff University



Chief Investment Officer, Church Commissioners for England


CIO, RMB Asset Management


Roles including Head of Multi-Manager Investments, Schroders


Director and Chairman of the Investment Committee, Guy’s and St Thomas’ Charity


Non-Executive Director, Pension Protection Fund

To contact the author of this story with comments or news, email David Wighton

Jerry B. Hatch