Investment Report

Q2 2021 Investment Report

As of June 30, 2021

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Market Conditions

For the quarter ending June 30, markets continued to move sharply higher as the S&P 500 gained 8.5% and has risen 40.8% over the last year. Concerns regarding the COVID-19 pandemic and global growth prospects caused interest rates to decline as the Barclays Aggregate Bond index gained 1.8% for the quarter but has declined 0.3% for the past year.

While most would agree that life remains unusual, difficult, and complex, capital markets seem to be living in a sedate, risk-free alternate universe. Unsurprisingly, the cognitive dissonance between these extremes has led to questions as to how this can be and what comes next.

We too would like to know what the world and markets will look like six or twelve months from now. Yet, we are also at peace with our inability to know that which cannot be known and accept the fact that short-term market conditions are simply a random walk. From this perspective, surprise is off the table and decision-making can be focused on valuation and diversification where the probability of long-term success is far higher. This philosophy is centered on the outsized importance of long-term outcomes with the knowledge that periods of market stress are a key contributor to the successful results of disciplined, experienced investors such as the Foundation.

Portfolios

The Balanced Pool serves philanthropists who have a longer-term grantmaking horizon and is designed to maximize total return while protecting principal. This pool maintains a diversified portfolio that includes exposure to global equity markets, alternative investments, and more conservative asset classes such as US Fixed Income. The portfolio benefitted from its exposure to “value” stocks in Japan and in the smaller capitalization segment of the US market. The Balanced Pool gained 5.5% and 31.8% in the second quarter and in the last twelve months, respectively. While we are cognizant of ever-changing short-term market conditions, we remain focused on long-term pool performance and are encouraged that the pool continues to out-perform its 5 and 10 year benchmarks.

In addition to our Balanced Pool, we offer other investment options to meet our fund holders’ needs. Our Socially Responsible Pool, designed to meet ESG (Environmental, Social, and Governance) requirements while also providing competitive economic returns, gained 3.0% for the quarter. Our Intermediate-Term Pool, designed to meet the expectations of donors with a grant-making horizon in the 2-7-year range, also gained 3.0%. The Foundation also manages a Short-Term Pool for donors with very short grant making horizons. This pool is intended to preserve capital as best as possible; it gained 0.1% in the quarter. Lastly, the Foundation offers an Index Pool, which is all passive and a Growth Pool. These pools gained 5.2% and 6.5% on 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