Feb. 27 (Bloomberg) -- The Church of England’s investment fund, which pays the pensions of retired clergy, lost about 1.2 billion pounds ($1.7 billion) last year as stock markets tumbled and property values slumped amid the global financial crisis.

The 305-year-old fund, one of the best performing funds of its type over the past decade, lost an estimated 22 percent last year, the Church Commissioners said in an e-mailed statement today. The benchmark FTSE 100 Index lost almost 30 percent, the statement said.

“The impact of the overall financial situation would be much greater had we not taken a range of steps before the full extent of the financial crisis was felt by the markets,” Andrew Brown, secretary of the Church Commissioners, said in the statement.

Church Commissioners invest the wealth accrued since King Henry VIII broke with Roman Catholicism in the 16th century and seized the papacy’s U.K. assets. It owned 3.5 billion pounds of stocks and 1.6 billion pounds of property assets at the end of 2007, according to its latest published annual report.

Action taken last year included selling some residential properties, disposing of some shops and offices before the market dropped and selling some U.K. equities in the first part of 2008, said Brown.

Royal Shell Stake

“The return is likely to be slightly worse than the typical fund which can now have as much as 50 percent invested in bonds,” said Crispin Lace, an investment consultant at Mercer Investment Consulting in London

The investment portfolio was worth 5.6 billion pounds at the end of 2007, according to the annual report. At the end of 2007 its largest equity holding was a 180 million-pound stake in Royal Dutch Shell Plc, Europe’s largest energy company.

Over the 10 years to the end of 2007 it was ranked second among about 200 similar funds covered by the performance measurement unit of State Street Corp.’s WM Co.

The 2008 returns haven’t yet been audited and the final results won’t be published until May. On an unaudited basis the fund has had an annualized return of 5.4 percent over the past 10 years, compared with the average of 3.7 percent among the funds measured by WM, the statement said.

No Pension Cuts

That’s enabled the commissioners to pay out 210 million pounds more over the period than if the fund had performed in line with the others, said Brown.

The slump in the value of the fund won’t affect the ability of the Church Commissioners to pay the pensions of clergy who retired before 1998 and other costs such as bishops’ salaries at planned levels until the end of next year, Brown said in the statement. That amounts to about 170 million pounds a year, said spokesman Steve Jenkins. About 10,000 clergy and the spouses of dead priests get their pensions paid from the fund, said Jenkins

The plan pays salaries and pensions of about 16,000 people working for the Church of England. It spent a record 105.5 million pounds on pension payments in 2007.

The money taken by Henry VIII from the papacy was given to the church in 1704 by Queen Anne through the establishment of Queen Anne’s Bounty, a predecessor of the Church Commissioners. The commissioners have supervised the fund since 1948.

The Church of England is part of the Anglican Communion, whose U.S. arm is the Episcopal Church.

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To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: February 27, 2009 12:52 EST