Faith based short selling

Telegraph:

Managers of the Church's £5 billion investment portfolio have lent shares, for a fee, to traders who can then make huge profits by betting that the value of the stocks will fall.

Such trading in the shares of financial companies has been temporarily banned by the Financial Services Authority after it was blamed for driving down the share price of Halifax Bank of Scotland, which came close to collapse before it was taken over by Lloyds TSB last week.

The Archbishop of York, Dr John Sentamu, described short sellers as "bank robbers and asset strippers" earlier this week, while the Archbishop of Canterbury, Dr Rowan Williams, condemned the "basic unreality" of the global trade in debts.

But it has emerged that "a small number of foreign stocks" belonging to the Church have been lent to short sellers.

Short selling involves traders borrowing shares from their owners, selling them to a third party, then waiting for the price to drop so they can buy the same number of shares at a lower price and return them to the lender. The difference in the two prices is the trader's profit, though the practice is risky, as the trader stands to make a huge loss if the price goes up.

The Anglican Church's shrewd fund managers have achieved an impressive 9.5 per cent average annual return on their assets over the past decade.

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If the managers had a fiduciary duty to maximize returns, they probably picked one of the best ways to do it during the current market. Apparently the funds managers invest in other politically incorrect but profitable securities. If the church would rather make less money it may need to find some politically correct losers.