Investment Performance
Q4 2024 Report
Thank you for choosing Seattle Foundation as your partner in philanthropy. We know that you share our commitment to creating a region of shared prosperity, belonging, and justice. We appreciate your confidence in us to manage your assets in service of a greater goal: fostering a community where everyone can thrive. We are pleased to share these results from Q4 and we welcome any questions or feedback
Market Conditions
U.S. Equity markets continued their strong performance, ending 2024 with gains of over 20% for the second year in a row; fueled by long-anticipated rate cuts and enthusiasm around AI technologies, large-cap tech companies led markets higher. Beneath the headlines, the U.S. consumer remained the underappreciated engine driving the economy. Accounting for over two-thirds of domestic GDP, their steady spending helped the economy maintain its momentum throughout 2024, while higher interest rates cooled the economy and brought inflation down from peak levels. Global markets were also positive with gains over 17%. It’s important to note this as the portfolios have both U.S. and non-U.S. exposure.
The fourth quarter concluded the U.S. election cycle, which boosted stock prices in November due to investors’ expectations of a pro-business agenda including favorable tax and regulatory policies. U.S. services sector activity picked up in December, driven by strong demand. However, the quarter ended with negative equity returns, which were impacted by concerns over interest rates, market uncertainty over potential unanticipated policy changes and its broader impact, as well as geopolitical risks.
Investment-grade bonds experienced a decline over the fourth quarter but generated positive returns for the year due to higher interest rates. Credit spreads narrowed significantly, nearing historic lows and well below the 10-year median, while lower-quality bonds outperformed higher-quality ones during this period.
We anticipate that the current trend of narrow stock performance will shift, giving way to a new phase. At that point, the primary concern will be whether portfolios are structured to achieve absolute returns that can effectively preserve wealth, maintain purchasing power, and ensure sustainable impact for the Foundation.
Portfolios
The Balanced Pool is the Seattle Foundation’s primary investment pool and is actively managed to deliver returns at 5% plus CPI over a long-term horizon. It maintains a diversified portfolio that includes exposure to global equity markets, alternative investments, and more conservative asset classes such as U.S. Fixed Income. Over the last 10 years, the Balanced Pool has gained 6.7% per annum. The Pool returned -1.9% in the fourth quarter and registered a 9.1% gain in the last 12 months. The portfolio’s forward returns tend to be highly correlated to complexity of an investment climate—greater challenges translate to higher returns.
In addition to our Balanced Pool, we offer other investment options to meet our fundholders’ needs. Our Socially Responsible Pool, designed to meet ESG (Environmental, Social, and Governance) requirements while also providing competitive economic returns, returned -1.8% for the quarter. Our Intermediate-Term Pool, designed to meet the expectations of donors with a grantmaking horizon in the 2-7-year range, returned -2.4% for the quarter. The Foundation also manages a Short-Term Pool for donors with very short grantmaking horizons. This pool, which is intended to preserve capital as best as possible, returned 0.7% for the quarter. Lastly, the Foundation offers an Index Pool, which is all passive, and a Growth Pool. These pools returned 1.6% and -2.5% in 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,
Joseph Boateng
Chair of Investment Committee