DOMESTIC AND FOREIGN MARKETS DONORS THE COMMUNITY 2017 was a year of surprisingly strong investment returns. By Jeff Frazer OUTSIZED INVESTMENT PERFORMANCE MEETS OUTSIZED LOCAL NEEDS SUPER MARKETS T H E P I T T S B U R G H F O U N D AT I O N S AW E A R N I N G S F R O M I T S I N V E S T M E N T S S O A R lastyearwithastrategythatdeliveredremarkablereturnsfromforeignand domestic equity markets, which outperformed expectations. Foundationinvestmentsearned$132million,or14.2percent,in2017. This is net contributions across all portfolios. In a typical year, earnings in the range of $50 million to $60 million would be expected. Moreover,theFoundationsignificantlyexceededitsannualearningstarget, helping grow funds available for grants in a period when nonprofit funding needs have increased dramatically. The impressive returns also have given the investment portfolio greater stability in navigating market fluctuations. “Wherethemarketitselfisrepresentedongraphsasalotofjaggedpeaks and valleys, we’re looking for a much more upward-sloping, rolling hill,” saysJonathanBrelsford,seniorvicepresidentofFinanceandInvestments. “Last year, the graph was a sharp line upward. We did very well.” Whilethosereturnsweredramatic,theirimpactonfuturegrantmaking is less apparent. The Foundation’s grant-making dollars are based on a 36-monthrollingaverage.Goodyearstendtoevenoutyearswhenearnings are less than stellar. Average earnings for 2013–2017, for example, rose above the Foundation’s annual return target, despite including one year when earnings fell well short. And 2017 earnings could help compensate for this year’s performance should equity markets continue their first-half struggle to do better than low, single-digit returns. “What we don’t want is to have a significant downturn and see cuts in grantmaking like we did in 2008,” Brelsford says. The Foundation started investing its own assets in 2009, when the Legacy Fund was created. The largest component — the Legacy Perpetual Fund — investsinassets,includingpublicandprivateequities,bondsand hedgefunds.Investmentsinfixedincomeandrealassets,suchasrealestate, addsomeprotectionindownyearsintheequitymarketandagainstinflation. 47 RE PO RT TO TH E CO MMU N ITY THE PITTSBURGH FOUNDATION