Bizwatch

Divine Investments
Ever since King Henry VIII demanded a divorce, much has divided the Church of England from its Roman Catholic cousin. But the two European churches have come together recently to count their blessings — in euros and cents. The Vatican announced last week that it was in the black for the first time in four years, netting a 2004 surplus of nearly €3.1 million. Meanwhile, assets managed by the Church of England's Church Commissioners have fattened to $7.6 billion as its investment portfolio — which helps pay for priest pensions — continues to outperform the market. In March this year, London church officials hailed a yield of 13.6% for 2004, putting the fund in the top 3% of more than 700 similar British pension funds measured by the WM All Funds Universe benchmark. While Louis Henderson, spokesman for the Church Commissioners, is proud that the Church of England's portfolio is free of such sinful enterprises as pornography and gambling, he credits the recent high performance to a terrestrial treasure: real estate.

"It is fortuitous that the portfolio is weighted more toward property than other comparable funds," Henderson says. A similar happy fate has helped turn around the balance sheet on the Holy See's some €200 million annual operating budget, which accounts for the Roman Curia, Vatican diplomatic missions and media outlets. With the sale of several palazzos in Italy and an overall appreciation in real estate value, the Vatican closed with a net gain of €24.9 million on real estate in 2004. But Church officials know that economic gains are at the mercy of the Lord. With the bill on Pope John Paul II's mammoth funeral pending, noted Sergio Cardinal Sebastiani, chairman of the Holy See's economic affairs department, the Vatican might drop back to break-even for 2005. — By Jeff Israely and Adam Smith

Keep On Rolling
Were the obituaries for the auto business premature? Just a few months ago, major Western carmakers were on the skids. Standard & Poor's slashed the credit ratings for mighty Ford and General Motors to "junk" status in May; a month later, GM announced plans to cut 25,000 jobs. Sliding sales and depleted cash bumped Britain's MG Rover into administration in April. But it's summertime, and there are signs of life: GM's Employee Discount for Everyone promotion bumped its U.S. sales up by 41% in June, the best monthly sales performance since 1986.

And PricewaterhouseCoopers, Rover's administrator, was in talks last week with three separate suitors — involving two Chinese firms — for the carmaker. Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University's business school, sees a happy ending at Rover. With Britain "the first place to get major Japanese investment" in its auto sector, "it would be in keeping to get the first major Chinese offshore investment," he reasons. Could the good times catch on over at Volkswagen? Peter Hartz, head of personnel at the German carmaker, quit last week in connection with a bribery and sex scandal. Separately, the firm unveiled a cost-cutting plan aimed at restarting the firm. Said Wolfgang Bernhard, chairman of the Volkswagen Brand Group: "If we cannot survive here at Volkswagen, then industrial Europe is going to die." Hey, let's not be premature. — A.S.

The Bottom Line
	I do not intend regulating in the hedge funds area in the immediate future, if at all
		CHARLIE MCCREEVY, E.U. Internal Market and Services Commissioner, declining to rein in the lucrative but controversial industry