While the fund managed to rake in a bumper 17.1% return on the back of a strong performance in equities in 2016, it sold down its stock holdings by around 17 per cent or £500 million to help re-balance the portfolio during the same year, meaning a smaller boost from a further rise in stock prices is expected from 2017.
Andrew Brown, secretary and chief executive of the Church Commissioners, said: "Like all investors we were faced in 2017 with a number of headwinds and we've seen it with sterling, we've seen it with inflation and global markets have slowed.
"Equities had the strongest year in 2017, but equities make up about 40% of our fund, so we're heavily diversified," he said, adding that the fund invests in a raft of real estate, absolute return funds, hedge funds, private equity and venture capital.
"So 2017 is not going to be such a strong year as 2016, I'm sorry to say."
It means expectations for income growth will have to be managed, as the fund helps provide about 15% of the Church of England's annual operating costs.
However, Mr Brown said the weaker performance was not due to the Church Commissioners' responsible investment policy, which excludes stake in companies that do business in areas involving pornography, tobacco, gambling, high interest rate lending, human embryonic cloning and oil sands extraction.
Its is also committed to engaging with firms on environmental, social and governance issues, in the hopes of either changing corporate behaviour, with divestment a last resort.
"Any decision to reduce a benchmark of an investability will in some years have a negative effect... (but) there have been other years where actually rather than a headwind, an ethical slant to our fund has meant that we've benefited.
"So we're a long-term investor, we're a perpetual endowment and it's undoubtedly the right thing for us to do to invest in that way which means excluding those companies which, some years, have very good years."
Late last year, the Church threatened to pull investment from mining companies that fail to "uphold high standards", saying the industry is "particularly vulnerable" to poor governance, having already sold off stakes in Vedanta in 2010 and Soco International in 2015.
The fund also joined the Church Investors Group, whose members manage more than £17 billion of assets, in threatening to vote down key company appointments if firms fail to tackle climate change, promote gender diversity, or excessive pay.
"Excessive executive pay is increasingly a mainstream investor concern, it suggests a failure of governance, which has wider implications for long term sustainability and the long term confidence of all stakeholders," Mr Brown said.
The Press Association revealed last week that the Church Commissioners have been working with Sports Direct amid concerns over the treatment of factory workers and governance failures at the retailer, in which it holds a minority stake.
The Church of England declined to comment.
Sports Direct subsequently turned attention to Church of England's own adherence to issues like gender diversity, noting that few of its own bishops are currently women.
"We're committed to gender diversity in the Church of England and it is top of mind for our trustees. There's been substantial progress in recent years," Mr Brown said.
"The number of women in ordained ministry in the Church of England is at a record high, a third of the total number of active clergy, and last year women made up the majority of people entering training for ordination."
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