Q4 2022 Investment Report
As of December 31, 2022
Thank you for choosing Seattle Foundation as your partner in philanthropy. We know that you share our commitment to creating a region of shared prosperity, belonging, and justice. We appreciate your confidence in us to manage your assets in service of a greater goal: fostering a community where everyone can thrive. We are pleased to share these results from Q4 and we welcome any questions or feedback.
A solid, albeit uneven fourth quarter rally provided welcome relief but did not completely erase the sting of significant market declines in 2022; the S&P 500 fell 18.1% for the year while the Bloomberg U.S. Aggregate Bond Index dropped 13.0%. A 60% equity/40% fixed-income blend of these indices dropped 15.8% during 2022.
After several years of headwinds, 2022 brought good news for many value investors as the MSCI All Country World Value Index dropped -7.6% but outperformed its growth counterpart (-28.6%) by an impressive 21.0%.
Ultimately, 2023 is likely to be complex; but that does not mean we should be pessimistic. There will undoubtedly be winners and losers, with the likelihood of success favoring investors who pursue their work with rigor, patience, and risk awareness. In a time where some asset prices have become significantly detached from value, there is much opportunity ahead for prudent long-term investors such as Seattle Foundation to look forward to.
The Balanced Pool is the Seattle Foundation’s primary investment pool and is actively managed to deliver annualized returns of 5% plus CPI over a long-term horizon. 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 6.3% per annum. The Pool gained 7.3% in the fourth quarter and registered a 15.5% loss in 2022. Fourth quarter returns were helped by China’s relaxation of its Zero COVID policy and investors observing indications from the Federal Reserve (Fed) that the pace of policy tightening could slow down, and that elevated inflation could be cooling.
In addition to our 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, gained 6.3% for the quarter and registered a 17.6% loss in 2022. Our Intermediate-Term Pool, designed to meet the expectations of donors with a grantmaking horizon in the 2–7-year range, gained 5.2% and registered a 9.7% loss in 2022. The Foundation also manages a Short-Term Pool for donors with very short grantmaking horizons. This pool, which is intended to preserve capital as best as possible, gained 0.9% for the quarter and registered a 0.5% gain in 2022. Lastly, the Foundation offers an Index Pool, which is all passive, and a Growth Pool. These pools gained 7.2% and 7.4% in the quarter and registered 15.2% and 12.5% losses in 2022, respectively.
We are thankful for the opportunity to support you in creating powerful, rewarding philanthropy to make King County a stronger, more vibrant community for all. We welcome your questions and comments about Seattle Foundation..
Chair of Investment Committee