So the Archbishop of Canterbury can finally sleep easy, safe in the knowledge that his quest to put Wonga out of business is back on track now an investment of just under £100,000 by the Church Commissioners into a fund backing the payday lender is no longer doing so.
The Church Commissioners had bought into a fund managed by Accel Partners which had a stake in Wonga, among several other firms - a fact Justin Welby only discovered after he had fiercely criticised the company.
But this morning the Church Commissioners (speaking in the third person) said their ‘indirect investment exposure to Wonga in their venture capital has been removed’, adding that they ‘no longer have any financial or any other interest in Wonga’. Welby, who recently admitted he had no power to force the Commissioners to sell their stake, is clearly a happy bunny. ‘I’m absolutely delighted,’ he said, while the church’s head of ethical investments, Edward Mason, added that ‘we are very, very pleased to be able to announce this - it is a difficult thing to do’.
Difficult indeed. So difficult, in fact, that the deal has investors asking questions...
1. How did the church get out?
Pooled funds like the one the church invested in usually have terms locking investors in so tight, you’d need a miracle to get out.
The church has been very sketchy on the details as to how it got out, saying only that it has ‘managed to find a way to remove exposure to Wonga only from a pooled fund’.
The way investors see it, the Church Commissioners had two options (other than to pray): firstly, to beg Accel Partners to ringfence its investment and ensure it doesn’t go into Wonga, or secondly, to sell out of the fund.
2. Did the church lose money?
So if it did sell out, did it lose cash? Our sources tell us that in VC land, secondaries sell for between 60% and 95% of the original investment: and the good news is that Accel is one of the most respected venture capitalists out there. So if the church did lose cash, it is unlikely to have been much. And although £100,000 is a lot to most of us, in investment terms it’s pretty paltry.
3. Will this put venture capitalists off working with the church in future?
This is the £100,000 question. Investors in funds like Accel are an exclusive club, and if you’re approached by them, you need a good reason to say no. VCs are a skittish bunch, too - so if the Church Commissioners have sold out, it’s unlikely to have gone down well. In fact, if that’s what’s happened, ‘I think they’ll have come to terms with the fact they’ll never work with [Accel] again’, a senior institutional investor told MT.
4. How will the church guard against similar mistakes in future?
The Church Commissioners have already announced a review of their policies, not just around direct investments, but also around what they’ll allow indirect investments to do. So next time they make an investment, its managers will have very specific parameters to work around. Will that make venture capital firms less enthusiastic about working with the church? It’s a tough call.