Investment Report

Q2 2018 Investment Report

As of June 30, 2018

Kristin Sandaas

The wide range of economic and political events occurring in recent months fueled uncertainty in the capital markets here and abroad. To weather this volatility, Seattle Foundation offers a range of investment offerings based upon risk tolerance and grantmaking timelines, and we are pleased to share economic commentary and the performance results from our investment pools for second quarter 2018.

On the economic front, the fundamental strength seen in many countries across the globe was overshadowed by concerns over trade wars and rising interest rates. Trade, in particular, created a wide performance gap between developed and emerging countries, with the Standard & Poors 500 Index gaining 3.4% this quarter while emerging markets as measured by the MSCI fell by 8.0%. These nations, notably China and Latin American countries, have been negatively impacted by trade war rhetoric in recent months. While Europe continues to see positive growth overall, it, too, has been marred by political turmoil.

The United States continues to see strong job growth, with another 213,000 jobs added in June. The unemployment rate rose to 4.0% after the labor participation rate jumped. Gross Domestic Product (GDP) growth held at 2.0% which, while positive, is lower than recent quarters. The Federal Reserve raised the Federal Funds Rate another 0.25% in June, to a range of 1.75% to 2.00%.

Our largest investment option, the Balanced Pool, maintains a diversified portfolio that includes exposure to multiple equity markets, in addition to conservative asset classes such as US Fixed Income. Increased market volatility during the second quarter led to wide dispersions in performance, however the pool’s diversity led to stable gains of 0.2% on the quarter and year-to-date gains of 0.7%. In contrast, the benchmark (60% global equities/40% Barclays aggregate) lost -0.8% over the same time frame. Over the last 12 months, the Balanced Pool has gained 8.8%, net of investment management fees, and continues to outperform its target benchmark in all periods, returning 5.9% over the past 10 years.

In addition to our Balanced Pool, we offer other investment options to meet our philanthropists’ needs. Our Socially Responsible Pool, designed to meet Environmental, Social, and Governance (ESG) needs while also providing competitive economic returns, gained 1.0% for the quarter and is up 5.5% over the past 12 months. Our Intermediate-Term Pool, designed to meet the expectations of philanthropists with a grantmaking horizon in the two to seven year range, gained 0.3% this quarter and 3.2% over the last 12 months. Also, the Foundation manages a Short-Term Pool for philanthropists with very short grantmaking horizons. This pool is intended to preserve capital. It gained 0.4% on the quarter and is up 1.0% for the past 12 months.

Lastly, the Foundation offers an Index Pool, which is passively invested. This pool was flat for the quarter and has gained 6.4% over the last 12 months. Our Growth Pool, which holds more than 80% of the portfolio in equities, lost -0.4% this quarter and gained 8.9% for the latest 12 months.

I’m very pleased to share that in May, the Investment Committee adopted a diversity policy to ensure proactive consideration of investment management firms owned and managed by people of color and women. Beginning in 2019, we will report on the diversity of our investment managers and the share of assets they manage. This will be available on our website.

In the Spring, we announced an evolution in our leadership team, with Fidelma McGinn named Chief Philanthropy Officer and Mary Grace Roske assuming the role of Chief Brand Officer. Longtime Foundation leader Michael Brown moved to spearhead the launch of the Civic Commons. This critical new Seattle Foundation initiative aims to create a new model for community engagement, activating all partners in a collective approach to decision-making. The search for a Chief Impact Officer to lead our civic leadership and grantmaking programs is now underway.

We are thankful for the opportunity to support you in creating powerful, rewarding philanthropy to make Greater Seattle a stronger, more vibrant community for all. I welcome your questions and comments about Seattle Foundation.

 Kirstin Sandaas signature

 

Kirstin Sandaas, Chief Financial Operating Officer