Investment Report
as of December 31, 2014
In evaluating long-term performance, The Seattle Foundation utilizes two
portfolio measurements: a market-based target benchmark, and inflation
plus spending (CPI + 4.5%). The Balanced Pool exceeded both benchmarks
at 3 and 5 years, but fell short of both at 10 years due to inclusion of the
financial crisis in that time horizon. In 2014 the portfolio returned 3.8%,
which outperformed the target benchmark of 3.7%, but underperformed
the CPI + 4.5% benchmark of 5.4%. This diversified investment approach,
which shielded us from significant declines in prior years, muted the 2014
performance as negative returns in international equities offset the strong
performance of U.S. equities. The Foundation embraces a diversified asset
allocation that is consistent with best practices for investing an endowment.
In addition to our Balanced Pool, we offer other investment options to meet
our fundholders’ needs. Our Socially Responsible Pool’s U.S.-centric focus
has benefited results in recent years. This pool gained 10.9% over the past
5 years and 11.3% in 2014. Our Intermediate-Term Pool, which is designed
for donors with a grantmaking horizon in the 3 to 5 year range, gained 5.4%
over the past 3 years and 2.6% in 2014. Meanwhile, our Short-Term Pool,
designed for donors with the shortest grantmaking horizon, performed in line
with its capital preservation objective, gaining 0.4% over the past 3 years and
0.3% over the past year.
The Seattle Foundation
Performance is shown net of fees
Consolidated Investment
Fund Target Benchmark
12%
CPI + 4.5%
10%
8%
6%
10.3%
6.8%
6.2%
6.0%
6.3%
8.4%
8.7%
3 Years (annualized)
5 years (annualized)
10 years (annualized)
5.9%
1 Year
5.4%
2%
11.1%
4%
3.7%
The Balanced Pool, our largest and most popular investment pool, is
intended to meet the objectives of (1) long-term returns exceeding the
sum of inflation plus spending (CPI + 4.5%) and (2) protection of assets.
A primary goal is to allow consistent grantmaking throughout all market
conditions, including downturns. Consistent with a total return approach,
the Balanced Pool is diversified among asset classes and includes U.S. and
non-U.S. equities, fixed-income, and inflation-protecting investments. In this
way, the pool participates in equity market gains while obtaining protection
from investments that may shield the portfolio in more difficult periods.
Balanced Pool Performance Comparisons
as of December 31, 2014
3.8%
2014 was an eventful year for The Seattle Foundation,
fueled by a strong U.S. economy, increased gifts from
our fundholders, and new philanthropic partnerships
in our community. Grants hit a record high mark at
$85 million and the Foundation launched numerous
new initiatives, signaling a fresh and impactful strategic
course for the organization. Among the highlights for
the year is the growing impact of GiveTogether, with
our support for success in higher education generating
Jane Repensek
$500,000. The year also saw the public launch of the
SVP, Finance &
Center for Community Partnerships, the addition of
Operations
new individual, family and corporate fundholders,
and the transition to a new president and CEO, Tony Mestres. Throughout
the year, we maintained our prudent stewardship of the nearly $800 million
in charitable assets we manage on behalf of our community for future
philanthropic investment.
0%
1 YEAR
3 YEARS
(Annualized)
5 YEARS
(Annualized)
10 YEARS
(Annualized)
The Seattle Foundation Annualized Rate of Return
1 YEAR
3 YEARS
5 YEARS
10 YEARS
3.8%
11.1%
8.7%
6.0%
Balanced Pool Strategic Asset Allocation
100%
80%
60%
40%
20%
0%
'99
'01
'03
'05
'07
'09
'10
'11
'12
'13
'14
Sincerely,
Jane Repensek
Senior Vice President, Finance & Operations
Domestic Equity
Real Estate
International Equity
Real Return
Fixed Income/
Hedged Fund Composite
Cash & Equivalents
Private Equity
Best Performing Asset Class
Investment Report - December 31, 2014
page 2
INVESTMENT PHILOSOPHY
Effective stewardship of assets is key to The Seattle Foundation’s
ability to fulfill its mission of fostering powerful and rewarding
philanthropy to make King County a stronger, more vibrant
community for all. Reflecting the infinite life of a community
foundation, we take a long-term approach to our investment
management to maximize the philanthropic resources available over
time to meet community needs. Our investment objective is to, over
time, generate compound annual returns of 8% through prudent
management of a diversified portfolio.
INVESTMENT STRATEGY
The Seattle Foundation exercises prudent investment practices
that are oriented towards a “total return” approach to investing,
which aims for a total change in fund value over a given time period
resulting not only from interest and dividend income, but from
capital appreciation as well. This approach allows the Foundation
to capture a portion of the historically higher returns in the equity
and equity-like markets. Our total return approach to investment
management is consistent with the Uniform Prudent Management
of Institutional Funds Act (UPMIFA), as implemented by
Washington State.
As a prudent steward, the Foundation has the following main
priorities for our Balanced Pool:
1. Long-term annualized returns exceeding CPI + 4.5%
2. Protection of assets
INVESTMENT POOLS
The Seattle Foundation will help you select
the investment strategy best matched to your
giving plans and goals. Our Balanced Pool
is a well-diversified portfolio reflecting a
“total return” approach, focused on ensuring
capital growth over the long term (ten
years). The Intermediate-Term Pool invests
primarily in fixed-income securities, offering
less volatility and lower returns to support
a giving horizon of three to five years. The
Short-Term Pool is for fundholders with a time
frame of less than two years for distributing
charitable funds. The Socially Responsible
Pool is designed to achieve both economic
returns and environmental, social and
governance investing over a long-term giving
horizon and invests largely in U.S. equities.
2014-2016 INVESTMENT COMMITTEE
Steve Hill*
CHAIR
Lead Faculty
Bainbridge Graduate
Institute
In addition, the Foundation offers Intermediate-Term Pool, ShortTerm Pool and socially responsible investment options, as well as
outside management for funds larger than $750,000.
Tom Alberg
INVESTMENT COMMITTEE
Joseph Boateng
The Investment Committee, a standing committee of the Board
of Trustees, is charged with overseeing the investment activities
of the Foundation. This includes retaining investment managers,
as needed, to meet the objectives of the investment policy, and
monitoring the performance of those managers. The committee also
advises the Board of Trustees on investment policies, including asset
allocation. The committee consists of nine members, selected for
their investment expertise and judgment. Two of these members also
serve on the Board of Trustees.
Stan McCammon
President & CEO
Joshua Green
Corporation
Mary Pugh
Managing Director
Madrona Venture Group
Chief Investment Officer
Casey Family Programs
Keith Ferguson
Chief Investment Officer
University of Washington
Founder and CEO
Pugh Capital
Management
Dan Regis
Managing Director
Digital Partners
John Stanton*
Chair of the Board
Trilogy Partnerships
Alan Heuberger
Portfolio Manager
Cascade Investment
* Seattle Foundation board member
1200 Fifth Avenue, Suite 1300, Seattle, WA 98101
TEL (206) 622-2294 FAX (206) 622-7673
WWW.SEATTLEFOUNDATION.ORG