Apr 3, 2023 · 1h 2m · capital-allocators
Tom Joy – Divine Diversification and Responsibility at Church Commissioners (Capital Allocators, EP.306)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Tom Joy, Chief Investment Officer at the Church Commissioners for England, exploring how the £10 billion endowment combines disciplined governance, internal tactical hedging, authentic diversification in real assets, and proactive responsible investment.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 20.7% of the talking time here. How this is scored →
Ted as informed peer 4.0 Guest teaching 4.1 Guest disagreement 1.1 Ted pushing back 1.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:45 Engagement vs divestment false dichotomy
Tom pushes back against conventional activist views, asserting that choosing between engagement and divestment is a false dichotomy because blunt divestment alone does not work.
Hardest push from Ted ▶ 45:43 Ted challenges defensive equity structureTed directly questions the trade-off of paying active fees for defensive equity long/short strategies over simply implementing a lower-beta long-only strategy.
Biggest teaching moment ▶ 11:50 Lowering return targets during high valuationsTom explains the counterintuitive discipline required to lower return hurdles when prospective market returns look weak so that the fund is not forced to take improper risk.
Ted holds their own ▶ 45:43 Ted demonstrates asset allocation expertiseTed displays institutional allocation fluency by drilling into the beta consistency and implementation differences between long/short alpha and factor-tilted defensive equities.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Career Origins and Journey to Church Commissioners | 3 | 3 | 1 | 1 | Ted guides the biographical opening smoothly, asking open-ended questions about Tom Joy's career transition from Schroders to becoming the first CIO of the Church Commissioners. | |
| Church Commissioners History, Objectives, and Spending Policy | 4 | 5 | 1 | 1 | Tom educates Ted on the fund's historical split with Rome origins and explains his decision in 2019 to lower the return hurdle from RPI+5 to CPIH+4 to avoid taking undue risk in stretched markets. | |
| Establishing Governance, Committee Dynamics, and Team Culture | 5 | 4 | 1 | 2 | Ted probes into governance dynamics, asking why external manager hiring involves committee sub-groups while firing is delegated entirely to the staff. Tom elaborates on the behavioral reasons behind separating hiring and firing authority. | |
| Internal Management, Derivatives, and Tactical Asset Allocation | 4 | 4 | 1 | 1 | Tom outlines Church Commissioners' internal derivative overlays and episodic tactical asset allocation (TAA) model, while Ted asks focused structural questions on execution triggers and position sizing. | |
| Responsible Investment Framework and External Manager Alignment | 3 | 4 | 1 | 1 | Tom describes the Church's responsible investment approach, stressing a focus on doing good rather than just looking good, while Ted facilitates the conversation with high-level framing questions. | |
| Sponsor Message: Ridgeline Investment Management Tech | 4 | 5 | 2 | 1 | Following the sponsor break, Tom rejects the standard binary of divestment vs engagement as a false dichotomy and explains their active role in backing Engine No. 1's Exxon campaign. | |
| Genuine Diversification, Defensive Equities, and Private Equity | 5 | 4 | 1 | 2 | Ted tests the defensive equity framework by asking why Tom uses long/short managers rather than cheaper low-beta long-only options, prompting Tom to defend his deliberate illiquidity budgeting and lack of FOMO. | |
| Real Assets, Credit Strategies, Risks, and Future Initiatives | 4 | 4 | 1 | 1 | Tom walks through non-correlated real assets including forestry, farmland, and UK land entitlement, before discussing macroeconomic inflation risks as Ted steers through final portfolio asset classes. |
Statements from this episode (19)
Joy: Starting in fixed income is probably the best foundation for investing
“I actually think starting out in fixed income is probably the best place to start if you're going to have a successful career in investments. It really sort of grounds you, makes you sort of really understand the sort of Charlie Ellis winning by not losing Man…”
Joy: Fixed return targets force allocators into excessive risk during downturns
“And if you've got a set target, and return prospects are not so good, by definition, you have to increase risk. Just what I think is the counterintuitive and worst time when you want to be Reducing risk.”
Joy: Church Commissioners team controls manager firing and re-ups without IC approval
“The different subgroups below the IC, one that focuses on all assets, excluding real assets, and one that is really a real assets group, they determine or approve new partnerships. So if I'm bringing partners in, new managers, external managers, I get them app…”
Joy: Investment committees resist firing managers with stellar trailing returns
“I think, and history's shown me, that it's very hard to get an investment committee to agree to firing a manager when their performance is stellar, or to not re-up With a manager when they've got absolutely shoot the lights out numbers, but in our view, they'v…”
Joy: Tactical asset allocation should only be used during market extremes
“Tactical asset allocation in particular is something that's episodic, and you really want to be utilizing it when the elastic is stretched very tight.”
Church Commissioners holds at least two years of unencumbered cash
“We always hold at least two years worth of unencumbered cash from a distribution perspective, net of the income we're going to get.”
Joy: Aggregate hedge fund industry does not justify its fees
“If I was to talk generically about the hedge fund industry, I would say that probably on balance,
At an aggregate level, that industry doesn't justify its fees or its role in the portfolio, because on a net of fee basis, it's really not going to give clients …”
Joy: Asset size is a real hindrance to active fund performance
“I mean, size is a real hindrance to performance.”
Joy: Telling external asset managers how to manage portfolios causes disaster
“You know, the last thing we would ever do is try to tell a third party manager how to manage their portfolio. That is certain recipe for disaster. And all of the good managers would say no, obviously.”
Joy: Divestment versus engagement is a false dichotomy in responsible investing
“So, I mean, I guess the first thing on divestment versus engagement, people often are in one camp or the other, and I would say it's a false dichotomy. You need both, because I think engagement without the ultimate threat of divestment is a very blunt instrume…”
Joy: Pure oil and gas companies face existential stranded asset risk
“We really sort of feel that pure EMP, or pure oil and gas companies, face ultimately an existential threat, and actually you arguably would probably want to divest from them for financial reasons. Now, of course, if you look at the last year or so, they've don…”
Joy: Church Commissioners allocates 40% to public equities, including 8% defensive long/short
“Roughly speaking, 40% of our fund is in public equities. Of that, roughly, 32% is in traditional public equities, and about eight percent is in In long short, what we label defensive equity.”
Joy: Church Commissioners holds 13% to 14% in private equity, split evenly between buyout and VC
“So we've been in private equity investing since the mid-nineteen nineties. It's roughly about 13 to 14% of our overall book, which is a sizable amount, but it's not nearly as big as some other investors have. I'm happy with that. It's roughly split equal betwe…”
Joy lets manager access dictate Church Commissioners' venture capital allocation
“So I don't target a VC allocation. I target VC managers, and I will take what I can get from the managers that I'm targeting. We have a very concentrated book of managers, and our allocation, if you like, is what drops out of the access we can get with the man…”
Joy: Fear of missing out is the most dangerous thing for an investor
“I think that the best thing an investor can have is lack of FOMO. I think FOMO is the most dangerous thing an investor.”
Joy: PE and VC are governed by the same economic drivers as public equities
“PE and VC ultimately is still equity. It's investments in companies. They're going to be determined by the same economic drivers as public equities.”
Joy: Church Commissioners allocates 5% to forestry and 6% to farmland
“We have a very big allocation to forestry, about five percent of the fund. We have a big allocation to farmland. That's about six percent of the fund.”
Joy: Commercial real estate acts like equity and undercompensates for illiquidity
“I think commercial real estate is closer to equity than sometimes people really realize. So we sold out, when I first arrived, we used to have quite a big allocation to commercial real estate, and I thought, well, why have we got this? It's illiquid. I don't t…”
Joy: Peer group benchmarking destroyed the UK defined benefit pension industry
“I would say peer group benchmarking. I think that is just wrong on so many levels. Thankfully, I'm not subject to it, but I think it, you know, destroyed the UK defined benefit pension scheme. And that whole industry is just so problematical on so many levels.…”