Q3 2026
A letter from the Foundation
Dear partners in ministry,
Thank you for entrusting your organization’s funds to Faith Foundation Northwest. As we continue to navigate this extraordinarily dynamic economic environment, we’re now providing extra reporting at quarter-end to keep you updated on the ways that the economic environment is impacting your investments.
The third quarter reflected much of the volatility we have seen since February of 2026. The conflict with Iran, now in its seventh month, kept oil prices elevated and in September the Federal Reserve raised rates for the first time since 2023. The quarter brought declining bond prices, a technology-led selloff in July, the best-performing August since 2021, and a difficult September in which a handful of large technology companies and the energy sector climbed higher while most other sectors fell.
In September we completed a planned change in the Diversified and Custom portfolios: three of our previous funds were replaced with two Vanguard funds. Each portfolio’s overall mix of U.S. stocks, international stocks and fixed income is unchanged. The new funds cost considerably less, and their historical performance has been superior; details are in the Fund reviews section. The Fossil Free and Stable Value portfolios were not affected.
As long term investors, we build portfolios for decades, not quarters, and we do not change a portfolio’s mandate because of one quarter’s results. We spread investments across companies, regions, and asset types. In a quarter when only one or two sectors worked, that diversification carried a visible cost. But this quarter was the anomaly, not the norm. Over time, diversification is what protects the funds our clients depend on, as it always has.
We also invest according to the values of the clients we serve. The screens in our portfolios carried a price this year as oil stocks led the market, yet the Fossil Free portfolios remain ahead of their Diversified counterparts over both three and five years at every risk level. Values and performance are a long-term partnership, not a trade-off settled in any single quarter.
We will continue to pursue strong long-term returns while serving our clients and communities.
Thank you for your continued trust and support. It is our privilege to serve as stewards of your financial assets.
Sincerely,
- The Faith Foundation Team
Summary of results
For the year through September 30, each Diversified portfolio is ahead of its benchmark, by 0.30 to 0.84 percentage points. Each Fossil Free portfolio is behind its benchmark, by 0.62 to 0.78 points.
U.S. stocks drove most of the quarter’s gains. The Diversified portfolios’ U.S. stock holdings returned about 2.5%, ahead of the broader U.S. market’s 1.4%.
Bonds subtracted from every portfolio’s return this quarter. The Bloomberg U.S. Aggregate Index fell 3.5%, our core bond funds fell between 3.5% and 4.1% as concerns over inflation, the Treasury Department’s financing strategy and federal debt exceeding $40 trillion drove a bond selloff. The conservative portfolios, the ones holding more bonds, had weaker quarters than those carrying more equity.
Oil and gas stocks rose about 17%. Our Fossil Free equity fund excludes oil and gas companies and, as such, did not participate in the rising energy sector.
September and year to date
| Portfolio | Sep 2026 | YTD | Difference |
|---|---|---|---|
| Diversified Aggressive | −1.07% | 10.42% | +0.32 |
| Policy benchmark | −0.96% | 10.10% | |
| Diversified Moderate | −1.41% | 7.68% | +0.30 |
| Policy benchmark | −1.35% | 7.38% | |
| Diversified Conservative | −1.61% | 5.62% | +0.84 |
| Policy benchmark | −1.46% | 4.78% | |
| Fossil Free Aggressive | −1.71% | 6.26% | −0.62 |
| Policy benchmark | −1.66% | 6.88% | |
| Fossil Free Moderate | −1.81% | 5.49% | −0.66 |
| Policy benchmark | −1.73% | 6.15% | |
| Fossil Free Conservative | −2.09% | 3.17% | −0.78 |
| Policy benchmark | −1.94% | 3.95% | |
| Stable Value Portfolio | 0.16% | 2.31% | — |
The Stable Value Portfolio has no market benchmark; its 1 year return is 3.07%.
Longer-term results through September 30, 2026
| Portfolio | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|
| Diversified Aggressive | 12.08% | 14.80% | 5.87% | 8.98% |
| Policy benchmark | 13.19% | 18.24% | 8.92% | 10.35% |
| Diversified Moderate | 9.20% | 12.27% | 4.50% | 7.20% |
| Policy benchmark | 9.97% | 14.79% | 6.62% | 8.09% |
| Diversified Conservative | 6.98% | 10.74% | 3.89% | 6.38% |
| Policy benchmark | 6.72% | 12.43% | 5.17% | 6.96% |
| Fossil Free Aggressive | 8.57% | 15.61% | 7.55% | — |
| Policy benchmark | 9.36% | 15.52% | 7.52% | — |
| Fossil Free Moderate | 7.70% | 14.75% | 6.93% | — |
| Policy benchmark | 8.51% | 14.66% | 6.91% | — |
| Fossil Free Conservative | 5.11% | 12.18% | 5.10% | — |
| Policy benchmark | 5.95% | 12.09% | 5.07% | — |
Annualized, net of fees. Source: Faith Foundation Northwest returns report, September 2026. The Fossil Free portfolios do not yet have a 10-year record.
Diversified Aggressive
Passive stock funds combined with an actively managed bond fund. This portfolio has the most volatility and the highest expected long-term return of the Foundation’s options and is intended for long time horizons.
- Equities85%
- Fixed income15%
10.42%Year to date, +0.32 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Diversified Aggressive | −1.07% | 10.42% | 12.08% | 14.80% | 5.87% | 8.98% |
| Policy benchmark | −0.96% | 10.10% | 13.19% | 18.24% | 8.92% | 10.35% |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Vanguard FTSE Social Index Fund (VFTNX) | US Equity | 55% |
| Vanguard ESG International Stock ETF (VSGX) | International Equity | 30% |
| Fixed Income Fund (FIF-I) | Fixed Income | 15% |
Performance drivers
The portfolio returned an estimated 0.72% for the third quarter, 0.32 percentage points ahead of its benchmark. The U.S. stock sleeve accounted for the entire lead. The sleeve held the two previous U.S. equity funds until the Vanguard FTSE Social Index Fund (VFTNX) replaced them on September 11, and gained about 2.5% in a technology-led market, 1.1 points more than the broader U.S. market. The main drag was rising rates, which cost the Fixed Income Fund (FIF-I) 3.45%, though with only 15% in bonds it felt that less than Faith Foundation’s other five portfolios. The international sleeve slipped about half a percent on a rising dollar, higher U.S. rates and costly oil.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return. Stock figures blend the previous funds through the September 11 exchange with the Vanguard funds after.
Diversified Moderate
65% equities, 35% fixed income, including 10% in inflation protection. Intended for long-term investments and endowments.
- Equities65%
- Fixed income35%
7.68%Year to date, +0.30 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Diversified Moderate | −1.41% | 7.68% | 9.20% | 12.27% | 4.50% | 7.20% |
| Policy benchmark | −1.35% | 7.38% | 9.97% | 14.79% | 6.62% | 8.09% |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Vanguard FTSE Social Index Fund (VFTNX) | US Equity | 40% |
| Vanguard ESG International Stock ETF (VSGX) | International Equity | 25% |
| Fixed Income Fund (FIF-I) | Fixed Income | 25% |
| Inflation Protection Fund (IPF-I) | Inflation Protection | 10% |
Performance drivers
The portfolio finished the third quarter essentially flat at an estimated −0.06%, 0.27 percentage points ahead of its benchmark. The U.S. stock sleeve provided the gains, contributing about a point of return in a technology-led market. The main drag was rising rates, with the 35% held in bond and inflation funds subtracting nearly a point. The Inflation Protection Fund (IPF-I) softened that, holding its loss to 0.83% through its commodity holdings while funds holding only inflation-protected bonds lost 3.55%.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return. Stock figures blend the previous funds through the September 11 exchange with the Vanguard funds after.
Diversified Conservative
50% equities, 50% fixed income. Lower volatility, for clients with shorter-than-average time horizons and lower risk tolerance.
- Equities50%
- Fixed income50%
5.62%Year to date, +0.84 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Diversified Conservative | −1.61% | 5.62% | 6.98% | 10.74% | 3.89% | 6.38% |
| Policy benchmark | −1.46% | 4.78% | 6.72% | 12.43% | 5.17% | 6.96% |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Vanguard FTSE Social Index Fund (VFTNX) | US Equity | 40% |
| Vanguard ESG International Stock ETF (VSGX) | International Equity | 10% |
| Fixed Income Fund (FIF-I) | Fixed Income | 40% |
| Inflation Protection Fund (IPF-I) | Inflation Protection | 10% |
Performance drivers
The portfolio lost an estimated 0.50% in the third quarter, 0.43 percentage points less than its benchmark declined, the largest lead of the six. Rising rates accounted for the loss. With half the portfolio in bond and inflation funds, the Fixed Income Fund (FIF-I) alone subtracted about 1.4 points. The U.S. stock sleeve offset most of that, contributing about a point, and the Inflation Protection Fund (IPF-I) held its loss to 0.83% through its commodity holdings while funds holding only inflation-protected bonds lost 3.55%.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return. Stock figures blend the previous funds through the September 11 exchange with the Vanguard funds after.
Fossil Free Aggressive
70% equities, 30% fixed income. The equity allocation tracks the MSCI World index, excluding companies whose value is based on fossil-fuel reserves. Intended for long time horizons.
- Equities70%
- Fixed income30%
6.26%Year to date, −0.62 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Fossil Free Aggressive | −1.71% | 6.26% | 8.57% | 15.61% | 7.55% | — |
| Policy benchmark | −1.66% | 6.88% | 9.36% | 15.52% | 7.52% | — |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Social Values Choice Equity Fund (SVCEF-I) | International Equity | 70% |
| Social Values Choice Bond Fund (SVCBF-I) | Fixed Income | 20% |
| U.S. Treasury Inflation Protection Fund (USTPF-I) | Inflation Protection | 10% |
Performance drivers
The portfolio was roughly flat for the third quarter at an estimated −0.04%, 0.32 percentage points behind its benchmark. The energy exclusion accounted for most of the gap. The Social Values Choice Equity Fund (SVCEF-I) rose 1.62% on its technology shares and contributed about 1.1 points, but it owns no energy companies, and with energy stocks up about 17% that exclusion explains more than half of the shortfall. The main drag on the return itself was rising rates, which cost the Social Values Choice Bond Fund (SVCBF-I) 4.11%, a deeper loss than the bond market’s because of its longer duration.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return.
Fossil Free Moderate
65% equities, 35% fixed income. Screened global stocks with actively managed, screened bonds and Treasury inflation protection. Intended for long-term investments and endowments.
- Equities65%
- Fixed income35%
5.49%Year to date, −0.66 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Fossil Free Moderate | −1.81% | 5.49% | 7.70% | 14.75% | 6.93% | — |
| Policy benchmark | −1.73% | 6.15% | 8.51% | 14.66% | 6.91% | — |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Social Values Choice Equity Fund (SVCEF-I) | International Equity | 65% |
| Social Values Choice Bond Fund (SVCBF-I) | Fixed Income | 25% |
| U.S. Treasury Inflation Protection Fund (USTPF-I) | Inflation Protection | 10% |
Performance drivers
The portfolio slipped an estimated 0.33% in the third quarter, 0.34 percentage points behind its benchmark. The technology gains in SVCEF-I helped, the energy exclusion and rising rates hurt. The larger bond stake made the difference. With 25% in the Social Values Choice Bond Fund (SVCBF-I) that fund’s 4.11% loss subtracted about a point from the quarter on its own.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return.
Fossil Free Conservative
50% equities, 50% fixed income. A screened, lower-volatility option for faith communities with shorter-than-average time horizons.
- Equities50%
- Fixed income50%
3.17%Year to date, −0.78 points against the benchmark
| Portfolio | Sep 2026 | YTD | 1 YR | 3 YR | 5 YR | 10 YR |
|---|---|---|---|---|---|---|
| Fossil Free Conservative | −2.09% | 3.17% | 5.11% | 12.18% | 5.10% | — |
| Policy benchmark | −1.94% | 3.95% | 5.95% | 12.09% | 5.07% | — |
Holdings
| Fund | Asset class | Weight |
|---|---|---|
| Social Values Choice Equity Fund (SVCEF-I) | International Equity | 50% |
| Social Values Choice Bond Fund (SVCBF-I) | Fixed Income | 40% |
| U.S. Treasury Inflation Protection Fund (USTPF-I) | Inflation Protection | 10% |
Performance drivers
This portfolio had the weakest third quarter of any among the Foundation’s offerings, with an estimated loss of 1.19%, 0.39 percentage points behind its benchmark. Rising rates accounted for the loss. Half the portfolio sits in bond and inflation funds, and together the Social Values Choice Bond Fund (SVCBF-I, −4.11%) and the U.S. Treasury Inflation Protection Fund (USTPF-I, −3.55%) subtracted about two points. The Social Values Choice Equity Fund (SVCEF-I) gained 1.62%, but at half the portfolio it could offset less than half of the loss. SVCBF-I’s greater rate sensitivity (how much a bond’s price changes relative to changes in interest rates) and the energy exclusion account for the gap to the benchmark.
Sources of return
Each bar is the holding’s contribution to the quarter’s return (its weight times its Q3 return); the bars add up to the portfolio’s estimated return.
Stable Value Portfolio
Intended to keep pace with inflation while offering a high level of liquidity and little market fluctuation. Suited to rainy-day funds, operating reserves and other short-term needs.
- Fixed income84%
- Cash16%
- FDIC-insured CDs and U.S. Treasuries 52%, senior secured loans to faith communities 32%, cash and equivalents 16%.
1-year return: 3.07%
Annual returns; 2026 is year to date through September 30. Source: Faith Foundation Northwest.
The portfolio holds FDIC-insured certificates of deposit and U.S. Treasuries with maturities laddered, along with senior secured loans to faith communities in the Northwest. Because these holdings mature within a few years, the portfolio is much less sensitive to interest rates than longer-term bond funds. As each CD and Treasury matures, the proceeds are reinvested at current rates. The portfolio returned 2.31% for the year through September 30.
The loans in this portfolio help congregations in our region build and repair their facilities. The interest they pay goes back to the churches and ministries that invest their reserves here.
Fund reviews
This section covers each fund the six market portfolios now hold. Each fund is compared with the benchmark listed in its own performance reporting; for the two Vanguard index funds, that is the screened index each fund is built to track.
Vanguard FTSE Social Index Fund, Institutional (VFTNX)
A passive fund that tracks the FTSE US Choice Index, made up of large and mid-sized U.S. companies screened for environmental, social and governance criteria. It became the Diversified portfolios’ core U.S. stock holding in September, replacing the two previous U.S. equity funds.
The screens, combined with the market’s concentration in technology, tend to tilt the fund toward technology and away from industrial and utility companies. This quarter that helped: technology rose while industrials and utilities fell, and the fund finished about 2 points ahead of the broad U.S. market even without energy stocks.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | 3.40% | 13.14% | 15.87% |
| Benchmark | 3.41% | 13.18% | 15.91% |
BenchmarkSpliced Social Index
Vanguard ESG International Stock ETF (VSGX)
A passive fund that tracks the FTSE Global All Cap ex US Choice Index, covering companies of all sizes in developed and emerging markets outside the U.S., screened for environmental, social and governance criteria. It joined the Diversified portfolios in September, replacing the International Equity Fund.
The fund rose about 15% for the year through September 30.
Most of this quarter’s gap to its benchmark is likely timing: the fund is valued when U.S. markets close, hours after most overseas markets, and the index uses local closing prices. Through September 30 the fund was within about a quarter point of its index for the year.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | −1.08% | 15.15% | 20.51% |
| Benchmark | 0.19% | 15.41% | 21.19% |
BenchmarkFTSE Global All Cap ex US Choice Index
Fixed Income Fund, I Series (FIF-I)
An actively managed bond fund, benchmarked to the Bloomberg U.S. Aggregate index.
Duration, a gauge of how sensitive the fund is to interest-rate moves, was 6.0 years (index 5.9), and yield to worst (roughly, the income the fund is positioned to earn) was 5.4% (index 4.6%), with 11.1% in emerging-market debt, 10.6% in commercial mortgages and 8.6% in high-yield (lower-rated) bonds, sectors the index barely holds.
The fund finished slightly ahead of its benchmark. Extra income from sectors outside the index helped, but was not enough to prevent a loss as rates rose.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | −3.45% | −2.58% | −1.32% |
| Benchmark | −3.51% | −2.91% | −1.84% |
BenchmarkBloomberg U.S. Aggregate Index
Inflation Protection Fund, I Series (IPF-I)
An actively managed fund invested mainly in U.S. Treasury Inflation-Protected Securities (TIPS), along with commodities, senior secured loans (loans whose rates adjust with the market) and non-U.S. inflation-linked bonds.
The fund held 59% in U.S. TIPS, 10% in senior loans, 9% in commodities and 16% in non-U.S. inflation-linked bonds.
Senior loans and non-U.S. inflation-linked bonds, which its benchmark does not hold, helped the fund finish well ahead of its benchmark. Its commodity holdings made it the best-performing fixed-income fund in our portfolios this quarter.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | −0.83% | 2.48% | 3.59% |
| Benchmark | −1.39% | 1.13% | 1.84% |
Benchmark90% Bloomberg U.S. Treasury Inflation-Linked Bond Index and 10% Bloomberg Commodity Index
Social Values Choice Equity Fund, I Series (SVCEF-I)
A passive global stock fund benchmarked to the MSCI World index, with additional sustainability and human rights screens.
About 72% of the fund is invested in U.S. companies. It holds no energy companies, compared with about 4% for the MSCI World index. It is up 11.5% for the year through September 30.
The fossil-fuel exclusion has the clearest effect of any screen in our portfolios. With energy stocks leading the market, the fund finished about a quarter of a point behind its MSCI World benchmark this quarter, with almost all of that gap due to the exclusion; in other periods the effect has run the other way.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | 1.62% | 11.48% | 15.14% |
| Benchmark | 1.88% | 11.75% | 15.24% |
BenchmarkMSCI World Index
Social Values Choice Bond Fund, I Series (SVCBF-I)
An actively managed bond fund benchmarked to the Bloomberg U.S. Aggregate index. It excludes fossil-fuel issuers and issuers tied to areas with high human-rights risk.
The fund’s duration, a gauge of how sensitive the fund is to interest-rate moves, was 6.7 years (index 5.9), 39% of the fund was in mortgage-backed bonds (index 25%), and its yield to worst (roughly, the income the fund is positioned to earn) was 5.5% (index 4.6%).
Because its duration is longer than the index’s, the fund lost more as yields rose. The same feature would help it if rates fall.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | −4.11% | −3.96% | −2.68% |
| Benchmark | −3.51% | −2.91% | −1.84% |
BenchmarkBloomberg U.S. Aggregate Index
U.S. Treasury Inflation Protection Fund, I Series (USTPF-I)
A passive fund holding U.S. Treasury Inflation-Protected Securities and tracking the Bloomberg U.S. Inflation Linked Bond Index.
At June 30, the fund’s duration was 7.0 years and its yield to worst was 2.3%, compared with 6.8 years and 2.3% for its benchmark. TIPS protect against inflation over time, but their prices fall when interest rates rise faster than inflation, as they did this quarter.
| 3 mo | YTD | 1 yr | |
|---|---|---|---|
| Fund | −3.55% | −2.54% | −2.45% |
| Benchmark | −3.34% | −2.24% | −2.16% |
BenchmarkBloomberg U.S. Inflation Linked Bond Index
Diversified and Fossil Free compared
For the year through September the Diversified versions are ahead, by 2.2 to 4.2 percentage points. This year’s gap is driven almost entirely by energy: as the Iran conflict continues, energy stocks have led the market.
Official returns, net of fees, through September 30, 2026. Periods over one year are annualized.
| Risk level | Div. YTD | Fossil Free YTD | Div. 3 YR | Fossil Free 3 YR | Div. 5 YR | Fossil Free 5 YR |
|---|---|---|---|---|---|---|
| Aggressive | 10.42% | 6.26% | 14.80% | 15.61% | 5.87% | 7.55% |
| Moderate | 7.68% | 5.49% | 12.27% | 14.75% | 4.50% | 6.93% |
| Conservative | 5.62% | 3.17% | 10.74% | 12.18% | 3.89% | 5.10% |
What explained the quarter
Three differences separated the two families this quarter: what the stock funds own, how the bond funds respond to interest rates, and how much of each portfolio sits in bonds.
The stock funds came first. The Diversified portfolios’ U.S. stocks (the U.S. Equity Fund and U.S. Equity Index Fund until the September 11 exchange to the Vanguard FTSE Social Index Fund) returned about 2.5% for the quarter. The Fossil Free portfolios instead hold the Social Values Choice Equity Fund, a global fund that is mostly U.S. and owns no energy companies. It returned 1.62%, and in a quarter when energy stocks rose 17%, most of that gap came from the oil stocks it does not own.
The bond funds pulled in the same direction. The Social Values Choice Bond Fund, used in the Fossil Free portfolios, has a longer duration than its index (6.7 years against 5.9) and holds more mortgage bonds, so it fell further as rates rose: −4.11%, against −3.45% for the Diversified portfolios’ Fixed Income Fund. The inflation funds split the same way: the Inflation Protection Fund, used in Diversified Moderate and Conservative, also holds commodities and floating-rate loans and lost only 0.83%, while the U.S. Treasury Inflation Protection Fund, used in the Fossil Free portfolios, holds only Treasury inflation-protected bonds and lost 3.55%.
Allocation widened the gap. Fossil Free Aggressive holds 70% in stocks against 85% for Diversified Aggressive, which means twice as much in bonds in the quarter when bonds were the drag on performance.
Those differences ran against the Fossil Free portfolios this quarter. Over longer periods they have run in favor of the Fossil Free portfolios: through September 30, the Fossil Free portfolios lead their Diversified counterparts over both three and five years at every risk level.
Important disclosures
Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Benchmarks are unmanaged, cannot be invested in directly, and bear no fees. This review is provided for informational purposes and is not an offer to buy or sell securities. Portfolios are not FDIC insured. Data from third parties is believed to be reliable but is not guaranteed.