FINANCE: Diversification at the Vatican

We are, to put it simply, more performance-minded now.

—Egidio Cardinal Vagnozzi

Head of the Vatican's Prefecture

for Economic Affairs

Wild rumors and extravagant conjectures have always surrounded the financial dealings of one of the world's largest and most reticent organizations, the Vatican. Partly to dispel such speculation, the Holy See has now chosen to lift some of the secrecy covering its investments. Journalist Paul Home, a Rome-based U.S. financial correspondent, was allowed over a period of 18 months to interview Cardinal Vagnozzi and other men who administer the church's temporal wealth. Home's report, in this month's Institutional Investor, a magazine that is highly regarded among professional money managers, tells much about how the Vatican handles—and is diversifying—its investments.

The Vatican's holdings, Home concludes, are much less than the usual inflated estimates. Cardinal Vagnozzi dismissed as "wild" one common guess that the total is $5 billion, and suggested that $500 million would be "closer, but still far from the mark." By extrapolating figures filed by the Vatican a few years ago in claiming an Italian tax exemption, Home cautiously suggests that the Vatican's portfolio of investments in Italian stocks "could be estimated at something like $140 million." The figure may—or may not—include investments managed by the Institute for Religious Works, which is the Vatican's bank, and does not take into account the funds of dioceses, which handle their own affairs. It also does not include the Vatican's growing investments outside Italy. Among the Holy See's current holdings of U.S. stocks are thought to be General Motors, General Electric, Shell, Gulf Oil, Bethlehem Steel, IBM and—a little unfortunately —TWA and Penn Central.

Division of Three. The Vatican has been diversifying its investments for more than a year (TIME, Nov. 28, 1969). "The trend is now to avoid maintaining controlling stocks in companies in which we invest, as was sometimes done in the past," Cardinal Vagnozzi told Home. "Today there are no more companies controlled by the Vatican. An important reason is that the Vatican simply cannot afford primary responsibility for business failures requiring transfusions of capital." The church has also been reducing its holdings in real estate, and transferring them into securities. Added the cardinal: "We want to improve investment performance—balanced, of course, against what must be a fundamentally conservative investment philosophy." For instance, the Vatican sold off—to Charles G. Bluhdorn's Gulf & Western—two-thirds of its 15% interest in Immobiliare, the international construction company that built Washington's chic Watergate apartments.