Investment Report

As of December 31, 2017

Tony Mestres colored headshot

The judicious stewardship of charitable assets is the paramount responsibility of the community’s foundation. Philanthropists and nonprofit organizations trust Seattle Foundation to manage funds for the shared benefit of our region. With an annualized return of 17.2% for the Balanced Pool, our investment performance for 2017 validates that trust is well earned. This impressive return is also representative of the Seattle Foundation’s highly impactful 2017, as we lived our mission to make Greater Seattle a stronger, more vibrant community for all.

The last 12 months represented a remarkable period of global economic growth. In the U.S., a rebound in corporate profits combined with the anticipated impact of the Tax Cuts and Jobs Act produced favorable market gains with little volatility. For 2017, emerging equities led the equity markets with a return of 37.3%, followed by non-U.S. developed equities which were up 25 percent. The Standard & Poors 500 Index took up third place, nevertheless booking remarkable gains of 21.8%.

Economic data outside of the U.S. also remains very encouraging. In Europe, unemployment has fallen to its lowest level since January 2009 and gross domestic product (GDP) growth over the past 12 months has outpaced the U.S. As compared to the U.S. Federal Reserve recent rate hikes, monetary policy within Europe remains a stimulant, as central banks maintained their policies of low interest rates. Chinese GDP growth remained on track, with growth in services outpacing Industrials. As President Xi begins his second five-year term, eyes are on his identified growth quality focus.

Our Balanced Pool maintains a diversified portfolio that includes strategically managed exposure to domestic and global asset classes, as well as alternative investments, balanced with more conservative investments such as U.S. fixed income. Reporting a fourth quarter gain of 3.6%, the Balanced Pool finished the year with an impressive gain of 17.2%. It’s noteworthy that the Balanced Pool has produced returns that out-perform (net of fees) our target benchmark in all of our target timeframes. Most importantly, the long-term returns exceed the benchmark by 50-90 basis points (net of fees) over the latest 3-, 5- and 7-year periods. 

Our Socially Responsible Pool, designed to meet environmental, social, and governance needs while providing competitive economic returns, gained 3.3% for the quarter and 9.9% on the year. Our Intermediate-Term Pool for philanthropists with a grantmaking horizon in the 2-7 year range, gained 1.3% this quarter and gained 6.8% for the year. The Short-Term Pool, intended to preserve capital, gained 0.2% for the quarter and 0.8% for the year. Our passively managed Index Pool gained 3.5% this quarter and an annual return of 15.8%. Finally, our Growth Pool, which holds more than 80% of the portfolio in equities, gained 4.5% this quarter and 19.9% for 2017.

These very favorable investment returns are just one way Seattle Foundation delivers value to our philanthropists and our community. Since 2015, we have executed on major evolutions of our value proposition, voice, community impact model, philanthropist engagement, and our approach to achieving organizational excellence. Our Moment of Max Q blog details the impact these evolutions during the last year, including: 

  • Investing $100 million in grants with partner philanthropists, across the spectrum of community needs — locally, nationally and internationally.

  • Welcoming 66 new funds (a 40 percent increase over the prior year) with high-impact philanthropists and corporations, bringing our total assets to over $1 billion.

  • Driving systems-change through innovative partnerships such as the King County Accountable Community of Health project to transform Medicaid in our region, the Seahawks Players Equality & Justice For All Action Fund, and The Seattle Times’ Project Homeless initiative, which explores solutions to this chronic challenge.

  • Igniting a powerful philanthropic agenda and attracting new social investors to increase racial equity and economic opportunity through our Community Investment Portfolio.

We look forward to an exciting and impactful 2018. Thank you for your partnership to make Greater Seattle a stronger, more vibrant community for all. 

Sincerely,
 
Kirstin Sandaas, Chief Financial Operating Officer

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