Church of England puts positive spin on £400m pension fund loss

The Church of England claimed yesterday that a multibillion-pound fund which clergy rely on for their pensions had performed "magnificently" despite losing £400m last year.

Falling share prices wiped 10 per cent off the value of the £4bn investment portfolio used to support retired vicars and parishes, which comprises equities, properties and assets including a collection of 17th century Spanish paintings.

The loss is one of the largest in the history of the church, which decided to invest more heavily in the stock market after it lost £800m in property speculation in the late 1980s and early 1990s. But the Church Commissioners, in charge of overseeing the fund, said the performance compared favourably with the losses of other pension funds.

Andreas Whittam Smith, a former head of the British Board of Film Classification who is now First Commissioner, said that over the past decade the fund's value had grown by an average of 10 per cent per annum. "That is a magnificent performance," he said. "Many institutions would like to achieve that."

The church said preliminary accounting figures for 2002 showed that its fund had a smaller loss than the market average. A spokesman for the church said: "In absolute terms, it is not a reason for hanging out the bunting. All we are saying is that in the context of the current investment climate, we have not suffered as great a loss as the average."

The fund, set up in 1704 using Queen Anne's Bounty – a windfall tax to help impoverished Protestant clergy – is used to pay the pensions of all clergy in service before 1998 and to support cathedrals, bishops and parishes in the poorest areas. Typically, it pays out £160m a year to dioceses.

The commissioners said the performance of their property holdings had helped offset the fall in stocks, of 23 per cent in the UK and 27 per cent abroad.

They have recently sold an eight-acre site at the Metro Centre in Gateshead, which the church once wholly owned, to Marks & Spencer, and there are plans to sell 13 paintings by the Spanish master Francisco de Zurbaran, worth £20m.