Investment Report

Q1 2020 Investment Report

As of March 31, 2020

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

The first quarter of 2020 brought an unanticipated scale of losses, uncertainty, and volatility. It has been a deeply challenging time for people throughout our community and the world. We know the current crisis is difficult to navigate, and we are here to support you as you consider the best way to move forward with your philanthropy. As we proceed to the next stages in our response to the virus and its impacts, we look forward to partnering with you as we collectively address our community’s greatest needs.

As you know, what began in late 2019 as an isolated crisis in China quickly became a global pandemic that unleashed a widespread health and economic crisis in early 2020. That crisis brought the global economy to an abrupt halt as production in most industries stalled and unemployment skyrocketed to unprecedented levels. After an impressive 2019, equity markets collapsed as global equities (MSCI ACWI) fell (21.1%) in three short months. As is often the case in market-shock environments, assets in all areas of the world fell in unison, leaving few options to find positive returns. The S&P 500 (U.S. stocks) lost (19.6%) while Non-U.S. Developed markets (MSCI EAFE) fell (22.8%), and emerging markets (MSCI EM), (23.6%).

While market weakness began in early 2020, the virus’ impact in the U.S. sparked large-scale sell-offs, with equity markets falling at an exceptional pace. By quarter end, the potential for another Great Depression loomed. Fortunately, the Federal Reserve stepped in quickly and significantly, providing needed liquidity in the markets. Bipartisan fiscal stimulus measures also directed support to individuals and businesses trying to weather this difficult period. Today, arguably, liquidity is no longer a concern, but solvency is certainly an issue. We anticipate increased defaults in the credit market over the next 12 months as organizations of all kinds struggle to stay afloat.

While the global economy grapples with poor earnings and high unemployment, historically forward-looking equity markets have already begun to focus beyond the current shutdown. Whether the market rebound in April is short-lived or sustainable remains to be seen, but we believe investors are now focused on how and when the economy will re-open, rather than on the recent turmoil. Amid much calamity, there are signs of hope and determination to rebuild.

Seattle Foundation’s various investment pools are all geared toward different grantmaking horizons and, therefore, have different risk profiles. Our 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. As noted above, in the initial shock period of this crisis, all asset classes correlated with one another, and therefore, diversification offered little solace. The Balanced Pool fell (17.8%) through March 31, in line with the declines of the underlying indices, and under-performed its benchmarks in the three-, five-, and seven-year timeframes. Over the 10-year timeframe, which is the pool objective grantmaking horizon, the pool earned 5.3% as compared to the target benchmark of 5.1%. While April showed significant improvements, by no means have markets recovered, nor do we suggest that all concerns are behind us.

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. Please contact our philanthropic services department should you wish to change your philanthropic funds investment pool. Philanthropists may request a change to their investment pools once per 12-month period during two windows annually: on or before March 31, with transfer happening no later than May 31; or on or before Aug. 31, with transfer happening no later than Oct. 31.

In the midst of the immense challenges presented by the coronavirus pandemic, Seattle Foundation is proud to contribute to our region’s relief efforts. On March 9, we launched the COVID-19 Response Fund to support the community’s most vulnerable workers and families. Supported by more than 60 partners from philanthropy, business, and local government, along with more than 5,000 individual donors, the Fund has raised $23.6 million to date. A first round of grants deployed $10.175 million to 128 community-based organizations that are providing emergency assistance, such as rent support, food security, healthcare, and childcare. Subsequent rounds of funding will be deployed in the days and weeks ahead, addressing community needs as they continue to evolve. In addition to managing the COVID-19 Response Fund, we have also been honored to collaborate with a number of other philanthropic response efforts, including All In Seattle and The Plate Fund for restaurant workers.

Thank you for your partnership, particularly now, when our collective contributions are more critical than ever. As our community weathers this crisis and looks toward recovery, we are grateful to support your philanthropy as we work together to make Greater Seattle a stronger, more vibrant community for all.

Please don’t hesitate to contact me with any questions or comments you may have. I can be reached at 206.515.2105 or k.sandaas@seattlefoundation.org.

Sincerely,

 

 Kirstin Sandaas signature

 

Kirstin Sandaas, Chief Financial Operating Officer