Investment Report

Q4 2019 Investment Report

As of December 31, 2019

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

Despite overwhelming pessimism by industry experts at the beginning of 2019, equity markets surprised everyone with impressive returns for the year. Equities gained across the globe, led by an S&P500 return of 31.5%. Non-US Developed markets (MSCI EAFE) gained 22.0% and emerging markets (MSCI EM) gained 18.4%. A strong fourth quarter punctuated these annual gains, as global equities overall (MSCI ACWI) rose 9.0%.

Entering 2019, GDP growth and corporate earnings were slowing, driving fears of a recession. Uncertainties surrounding Brexit in the United Kingdom and U.S. trade tensions with China, Japan, and Europe created further angst in the marketplace, leading many to expect a difficult year for investors.  But once again central banks around the world stepped in to provide liquidity and prop up equity markets. For its part, the Federal Reserve lowered overnight rates three times in 2019. They also reversed course on balance sheet reductions, instead expanding their balance sheet and generating more liquidity for the market. By the end of the year, GDP growth was back on track and the U.S. unemployment rate fell to 3.5%. More significantly the U-6 unemployment rate, which counts discouraged workers who have quit looking for a job and part-time workers who are seeking full-time employment, reached a new cycle low of 6.7%. 

Data began to improve outside the U.S. as well. European growth seems to have bottomed after the UK parliament agreed to an exit from the European Union in the fourth quarter. Japan added more than $120 billion in fiscal stimulus and aided equity markets locally. China continues to provide liquidity to its market and on Jan. 1, 2020, lowered reserve ratio limits to banks, its eighth such cut in the past two years. Despite negative headlines throughout 2019, the Chinese equity market gained more than 37% on the year.

The diversified portfolio of our Balanced Pool includes exposure to each of the equity markets described above, as well as to more conservative asset classes, such as U.S. Fixed Income. In 2019 the portfolio gained 18.3% (net of investment management fees). The Balanced Pool exceeded its Target Benchmark over the 5-, 7- and 10-year periods, and its success is largely attributable to active management in the equity space as well as to 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 Q4, Seattle Foundation made several big and exciting investments in equity and innovation. We awarded $500,000 in grants to 10 organizations that are addressing the disproportionate effects of climate change on communities of color and low-income communities. We were the first community foundation to join a unique philanthropic guarantee pool, led by the Kresge Foundation, a tool that will ultimately catalyze more than $150 million in investments in small businesses, climate and affordable housing nationwide. We also launched Civic Commons, a new initiative that brings people and communities together to take action on the region’s biggest economic and social challenges. Civic Commons includes the Scorecard for Shared Prosperity, which tracks the total well-being of the region’s residents, and We Belong Here, which develops relationships between people and institutions from all sectors.

As always, thank you for your partnership. We are proud to support your philanthropy as we work to make Greater Seattle a stronger, more vibrant community for all. I look forward to working together in the year ahead and welcome your questions and comments at any time. I can be reached at 206.515.2105 or k.sandaas@seattlefoundation.org.

Sincerely,

 

 Kirstin Sandaas signature

 

Kirstin Sandaas, Chief Financial Operating Officer