Investment Report

Q1 2022 Investment Report

As of March 31, 2022

Steve Hill Allyson Tucker headshot

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 Q1 and we welcome any questions or feedback.

Market Conditions

Global-equity markets sold off during the first quarter with the S&P 500, MSCI EAFE, and MSCI Emerging indices posting declines of 4.6%, 5.9%, and 7.0%, respectively. A confluence of risks, including war, global supply chain disruptions, pandemic-related shutdowns, rising interest rates, and record-high inflation, weighed on investor appetite and tempered risk-taking.

The focal point for the quarter was the Russian invasion of Ukraine, the reverberations of which were felt time and again all around the world. Rounds of sanctions by western powers combined with rising concerns about the prices of fuel and grain commodities sourced from Russia and Ukraine made for a volatile macroeconomic situation, which exacerbated existing inflationary pressures. Furthermore, relations between the US and China further deteriorated as a result of differing diplomatic approaches to the Ukraine conflict. The Chinese government’s decision to institute lockdowns in China’s largest cities following rising COVID cases further unsettled investor sentiment in the region.

The end result of these largely unforeseeable macroeconomic events, in conjunction with disappointing earnings from several of the largest global enterprises, was a period where many investors were caught seemingly wrong-footed. The pressures on fundamental active management, which were present in 2021, continued for a large swath of the investment management community. However, volatile periods such as these can also be highly beneficial, as the fear and uncertainty generate the potential for large disparities between the market price of securities and their intrinsic value. In such an environment, we believe that our portfolio is well positioned to deliver attractive returns on an absolute and relative basis.

Portfolios

The Balanced Pool is Seattle Foundation’s primary investment pool and is actively managed to deliver returns at 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 US Fixed Income. Over the last 10 years, the Balanced Pool has gained 7.6% per annum. The Balanced Pool lost 5.5% in the first quarter and registered a 3.7% gain in the last 12 months. The first quarter was a challenging one due in part to poor returns for our emerging markets exposure, valuation pressures on growth stocks, and market dynamics that were particularly challenging for stock picking. While we are cognizant of ever-changing market conditions, we are optimistic about the possibilities for the Pool to perform well in the years to come.

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, lost 6.5% 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, lost 3.3%. 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; it lost 0.5% in the quarter. Lastly, the Foundation offers an Index pool, which is all passive, and a Growth Pool. These pools lost 5.2% and 2.6% in the quarter, 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.

Sincerely,

Steve Hill Allyson Tucker Signatures