Investment Report

Q3 2019 Investment Report

As of September 30, 2019

Kirstin-Sandaas 250 Kirstin Sandaas, Chief Financial and Operating Officer

The financial markets reflected steady results in the third quarter, led by U.S. companies’ strong results and continued consumer and business confidence. With rising concerns about tariffs, political tensions and recessionary predictions in the news, and as we move close to year-end, it is an opportune time to align your investment pool choices with your philanthropic plans and timelines to preserve your giving capacity. We encourage you to review your pool selection to ensure that it is aligned with your giving horizon. (A summary of the pool options matched to grantmaking timelines is provided in this report.)

Looking at equity markets, S&P 500 closed the third quarter with a 1.7% gain, while domestic small cap equities fell 2.4% (Russell 2000), Non-US Equities (MSCI EAFE) lost 1.1% and Emerging Equities performed the worst, falling 4.2% (MSCI EM). Globally, the MSCI AC World index reflected an overall pause in gains, finishing the period with a 0.0% return. Investors continue to grapple with the same issues that have been driving the market for the last year, balancing solid but slowing economic data with uncertainty surrounding Brexit and the continued escalation of trade disputes between the U.S. and China.

Delivering on statements it made earlier this year, the Federal Reserve Board instituted new rounds of quantitative easing, as did the European Central Bank and Peoples’ Bank of China. These interest rate cuts marked a significant shift in the Fed’s position from late 2018, when it maintained a tightening stance. As a result of falling rates, fixed income continued its rise during the quarter with U.S. Core Fixed Income (Barclays Capital Aggregate) returning 2.3% for the period and 8.5% year-to-date.

Outside the U.S., growth remains positive but slow. The UK market weakened, however, as the likelihood of a “hard Brexit” increased. Simultaneously, the 19-member Eurozone reported an annualized growth rate of +0.8%. Japan continued to experience political stability as Prime Minister Shinzo Abe was victorious in Japan’s national elections, becoming the longest-tenured prime minister in Japan’s history. Economic growth remained positive in the nation due to increased consumer spending and despite negative effects of the manufacturing trade conflict between the United States and China.

Looking to Seattle Foundation’s investment pools, the Balanced Pool maintains a diversified portfolio that includes exposure to each of the equity markets described above, as well as more conservative asset classes such as U.S. Fixed Income. Through the third quarter, the pool gained 11.2% (net of investment management fees). The Balanced Pool also exceeded its target benchmark over the 5-, 7- and 10-year periods. Much of this success is attributable to active management in the equity space as well as strong performance in alternative areas. Performance data about our other investment pools are shown in the accompanying charts. I encourage you to read the pool profiles and evaluate the options available for your philanthropic funds.

During the quarter, we focused our community impact efforts toward helping uphold our democracy. Our Regional Census Fund is working to ensure a fair, accurate and inclusive census count in 2020, through making grants to trusted community-based organizations that are conducting effective outreach in hard-to-count communities. We convened some grantees at Bellevue Public Library in September, where leaders from the Washington Census Alliance, the Eastside Refugee and Immigrant Coalition, and the India Association of Western Washington discussed their work and the challenges they’re facing. In another ongoing effort to strengthen our democracy, we now serve as the fiscal sponsor for the Investigative Journalism Fund at The Seattle Times, a fund that supports in-depth original reporting and is the first of its kind in the nation. The fund’s innovation caught the attention of the Knight Foundation, which in August awarded it a $250,000 grant. We also continued critical investment through our Vibrant Democracy Initiative, supporting compelling leadership development efforts and strengthening the voice and participation of underrepresented communities in policymaking.

As we approach year-end, Seattle Foundation philanthropists are on track to conclude another record year of grantmaking to worthy causes, locally, nationally and internationally. Further, new philanthropists and new funds continue to come to Seattle Foundation. We anticipate 2019 will be a record year in gifts into the foundation. Most importantly, it is our positive partnership with you in driving impact to our community through furthering equity and opportunity that will be our most significant shared achievement for the year.

As we look to the end of the year and the busiest months for philanthropy, we remind you that our team of philanthropic advisors and program officers are available to support you in your giving and estate planning. Our mission is to ignite powerful, rewarding philanthropy to make Greater Seattle a stronger, more vibrant community for all and we thank you for your partnership in this mission. I welcome your questions and comments at any time and can be reached at 206.515.2105 or k.sandaas@seattlefoundation.org.

Sincerely,

 

 Kirstin Sandaas signature

 

Kirstin Sandaas, Chief Financial Operating Officer