Investment Performance
Q1 2026 Report
We are pleased to introduce Jason Malinowski, who was elected Chair of Seattle Foundation’s Investment Committee in March 2026. Jason is the Chief Investment Officer of the Seattle City Employees’ Retirement System and has been part of the Investment Committee since 2023.
Market Conditions
The first quarter of 2026 saw U.S. equities post a modest loss while non-U.S. markets and smaller companies held up better, with investor sentiment turning more defensive following a sharp selloff after the start of the Iran conflict. Markets contended with renewed geopolitical tension and persistent policy uncertainty as the Federal Reserve held to a measured pace of additional easing after 75 basis points of cuts in 2025. The U.S. dollar strengthened, partially reversing the prior year’s weakening trend, while elevated U.S. large-cap valuations continued to weigh on returns relative to less expensive non-U.S. peers. Value-style equities held up better than growth-style equities, extending the leadership shift that began in late 2025.
Investment-grade bonds delivered roughly flat returns for the quarter, with coupon income offset by modestly higher Treasury yields and slightly wider spreads. Higher-quality issues again outperformed their lower-quality counterparts. High-yield corporate bonds also held up, supported by coupon income and resilient credit fundamentals. The shape of the yield curve continues to reflect ongoing economic growth, sticky inflation, and fiscal imbalances, alongside emerging labor market softness and disinflationary effects from technology advancements.
The U.S. economy entered 2026 at a modest pace of expansion, with March unemployment steady at 4.3% and 2025 GDP growth of approximately 2.2%. Job gains continued in healthcare and food service, while the federal government and certain manufacturing-related sectors saw further declines. Wage growth remained subdued, and inflation held above the Federal Reserve’s 2% target, February year-over-year headline at 2.4% and core at 2.5%, with the most significant price increases seen in utilities, energy, food, and medical services. Heightened tariff and policy uncertainty added caution to business investment decisions.
Achieving mission-aligned returns will require navigating uncertainty while accepting complexity. The Foundation is positioned for lasting achievement by spreading investments across different assets, carefully evaluating valuations, and performing its own research, particularly as new information emerges that challenges commonly held viewpoints.
Portfolios
The Balanced Pool is the Seattle Foundation’s primary investment pool and is actively managed to deliver returns at 5% plus CPI over the long term; it maintains a diversified portfolio that includes exposure to global equity markets, alternative investments, and more conservative asset classes such as U.S. fixed income. Over the last 10 years, the Balanced Pool has gained 8.3% annualized. The Balanced Pool returned -2.0% for the quarter. The pool’s diversified strategy makes a compelling case for its positioning, supporting its north star of preserving capital while pursuing long-term growth.
In addition to the Balanced Pool, we offer other investment options to meet our fundholders’ needs. Our Socially Responsible Pool, designed to meet ESG (Environmental, Social, and Governance) requirements while also providing competitive economic returns, returned -2.6% for the quarter. Our Intermediate-Term Pool, designed to meet the expectations of donors with a grantmaking horizon in the two- to seven-year range, returned -0.1% for the quarter. The Foundation also manages a Short-Term Pool for donors with very short grantmaking horizons; this pool is intended to preserve capital as best as possible and returned 0.7% for the quarter. Lastly, the Foundation offers an Index Pool, which is fully passive, and a Growth Pool; these pools returned -0.8% and 0.2%, respectively, for the quarter.
We are thankful for the opportunity to support you in creating powerful, rewarding philanthropy to make our region a stronger, more vibrant community for all. We welcome your questions and comments.
Sincerely,
Jason Malinowski
Chair of Investment Committee
