October 10, 2008

CHICAGO – The Board of Pensions of the Evangelical Lutheran Church in America (ELCA) is holding steady and not panicking during the current global financial crisis, Board President John G. Kapanke, told the ELCA Conference of Bishops.

Kapanke addressed the conference Oct. 3. The ELCA Conference of Bishops is an advisory body of the church that includes the ELCA's 65 synod bishops, presiding bishop and secretary. It met here Oct. 2-7.

"Keeping a steady course of action is really what is called for," Kapanke said. The ELCA Board of Pensions, which manages the church's retirement and health programs, has a "long view" of the financial markets, he said. A disciplined approach is needed in these times, Kapanke said. He said he is confident the U.S. financial system will recover.

"We are experiencing the bursting of a broad-based housing and credit bubble," Kapanke said. The credit crisis started more than one year ago and is based in so-called sub-prime mortgages, he said. Kapanke said he hoped the actions of the U.S. Congress and government financial leaders would restore some confidence in financial markets.

Board of Pensions funds are broadly diversified, but as financial markets have declined, so have fund values, Kapanke said. While diversification helps manage risk, it doesn't fully protect against a general market decline, he said.

Some people have contacted the Board for financial information since financial markets began their declines, Kapanke said. Information has been sent to plan members and retirees and posted at http://www.ELCAbop.org/ on the Board's Web site.

Christina Jackson-Skelton, ELCA treasurer, said many congregations have investments in the Endowment Fund Pooled Trust administered by the ELCA Foundation, a balanced fund managed by the Board of Pensions. Distributions are normally 4.5 percent, based on a five-year rolling average of the market value, she said. "That really softens the impact that it could have on congregations, and I think that's a helpful point to remember," Jackson-Skelton said.

Some Foundation trust assets are managed through Wachovia Trust, she said. The parent company, Wachovia Bank, has been weakened by failing home loans, and Well Fargo is likely to take over the banking operations and wealth management unit of the company. "What's important is that these are trust assets. They do not become assets of the bank, and the property is not subject to the claim of the bank's creditors. We do not expect there will be any direct impact on these assets as a result of the shifts happening at Wachovia," the ELCA treasurer said.

The financial crisis has had no significant impact on the ELCA Mission Investment Fund, she said. "The Mission Investment Fund is highly capitalized in order to provide a greater level of security to our investors," she said. The fund has capital of more than $160 million, a net worth of nearly 30 percent of assets, considerably higher than what most banks maintain, Jackson-Skelton said. The fund does not engage in risky loan practices, she said.

The MIF has grown by $82 million in the first nine months of this year, Jackson-Skelton said. Nearly 800 MIF loans are outstanding, valued at $480 million, she said. Delinquency rates are low because the MIF works to ensure reasonable debt loads for congregations, Jackson-Skelton said.

Jackson-Skelton said information about the Mission Investment Fund's response to the financial crisis is at http://www.ELCA.org/mif/, on the ELCA Web site.

ELCA News Service