The SEI Story

  • Published on

  • View

  • Download

Embed Size (px)


Uncommon Knowledge: Learn what new investors can expect when they work with SEI and Park Avenue Securities. See what everyone's talking about on my Voices page: Steven D. Lichtenstein is an Investment Advisor and Registered Representative of Park Avenue Securities LLC (PAS). Securities products/services and advisory services are offered by PAS,95-25 Queens Blvd, 10th Fl., Rego Park, N.Y. 11374, 1-718-268-9255, a Registered Investment Advisor and broker-dealer. Forest Hills Financial Group Inc. is not an affiliate or subsidiary of PAS. PAS is a member of FINRA, SIPC. Steven D. Lichtenstein is a Field Representative of The Guardian Life Insurance Company of America, New York, N.Y. 10004. Steven D. Lichtenstein is an authorized user of The Living Balance Sheet, an electronic wealth organizational platform that provides a wide-angle view of your financial world and enables him to stress test your current financial approach. Gain insight and clarity on your complete financial picture, which when coupled with his professional experience and credentials, may provide you with the ability to make well-informed personal and business decisions and to take appropriate actions to achieve your desired results.


<ul><li> 1. SEI Investment PhilosophySteven Lichtenstein ChFC and SEIWhat makes us different ?</li></ul><p> 2. Who We AreSEI is a leading global provider of wealth management solutions. We help professional wealth managers, institutional investors,and private investors create and manage wealth and enable their long-term success by providing solutions that are bothcomprehensive and innovative.A Market Leader Administers $253 billion in client assets1 Manages $195 billion assets1 Processes 1.5 million end-investor accounts2 Leading global provider of Bank Trust technology 9 of the 20 largest North American banksare clients2SEI Advisor Network 20 years of experience in providing outsourcedsolutions to advisors Over 4,900 advisors using SEIs solution Over 170,000 end-client accounts $33.1 billion in advisors AUM1 One-stop accountability with SEI PrivateTrust Company 400+ dedicated professionals supportingthe SEI Advisor solution SEI is the #1 U.S. Advisory Third-PartyManaged Account Provider41As of September 30, 20122As of September 30, 20123As of December 31, 201143Q 2012 Summary Cerulli Associates2A Successful Company Founded in 1968, a public company since 1981(NASDAQ: SEIC) 2011 revenues: $930 million3 2011 net income: $205 million3A Global Company 2,400+ employees worldwide1 3. SEI Financially StrongSEI does not: Rely on the market to provide daily liquidity to fund its operations Take principal risk, nor does it actively trade the assets on its balance sheet Use leverage within its balance sheet Underwrite the risks of leverage through lending or insurance underwriting activitiesSEI has a financially strong balance sheet reflected through: Cash available Highly collectable receivables No direct issued debtSEI Private Trust Company (SPTC) Assets are custodied in a trust institution Assets are custodied in the investors name and are segregated from SEI This means SPTC creditors have no claim to investor assets SPTC may not pledge, lend or margin assets that are held in custody SPTC is regularly audited by independent and internal auditors and subject to examination by the Office ofthe Comptroller of the Currency3 4. Private Banks Institutional InvestorsFinancial AdvisorsA Leading Provider of: Custody Services Account Administration Statement Production Performance ReportingA Leading Provider to: Corporate Plans Unions/Taft-Hartley Plans Endowments Foundations HealthcareA Leading Provider of: Investment Programs Administration &amp;Technology Practice Management9 of the 20 largest NorthAmerican banks are clientsPlans &gt; $20 million5,000+ Advisors with$33.11 billion in advisors AUM1As of 09/30/12SEI Key SEI Business Segments Relevant to Advisors4 5. *Representative clients are selected by SEI to illustrate a sampling of SEIs client base, but may not necessarily endorse all of the services provided by SEI.List as of January 2012.Global Institutional Business Benefits Advisors5 6. Our Investment ManagementProcess6 7. SEI Goals-Based Investment Process1AssetAllocation3ManagerSelection4PortfolioConstruction6RiskManagement5TaxManagementIdentification of Client ObjectivesIdentification of the Relevant RisksIdentification of the AppropriatePortfoliosOur process matches client objectives with the appropriate risk measureand personalized portfolio implementation.Your AdvisorProvides:SEI Providesan Active Management Process:2PortfolioDesign7 8. SEI Investment Management Unit (IMU)Experienced SEIs investment team has over 20years of manager selection andportfolio construction experienceCredible Investment professionals haveextensive industry background andmay have CFA or MBA qualificationsAccountable Investment professionals tied toclient experience throughperformance -related compensationGlobal Organized into regional and assetclass specialists and globally locatedto improve research insightsInvestmentStrategyOversightCommittee(ISO)Client InvestmentStrategyInvestmentCommunicationsPortfolioStrategyInvestmentStrategyEquityFixed IncomeAlternativeRiskManagementTrading andOperationsProductManagement8 9. SEIs Investment ApproachActive Asset Allocation1AssetAllocation 10. Asset Allocation Primary Determinant of Total Portfolio RiskThe asset classes you pick explain most of variability of portfolio riskUsing past returns as a guide for asset class performance is problematicSource: Brinson, Singer, and Beebower (1991)Asset AllocationSecuritySelectionMarket TimingOther1AssetAllocation 11. 1900s 1960sValue-AddDeliveredtoClient1960s-1980s Stocks evaluated independently1980s-1990s Today Theory of portfolio selection(Markowitz) (Brinson, Beebower, Singer) Investors are not rational(Kahneman, Tversky)Goals-BasedInvestingStrategic AssetAllocationEfficient PortfolioConstructionConcentratedStockPortfoliosInvestment Approach The Evolution of Portfolio Management Theory111AssetAllocation 12. MODERN PORTFOLIO THEORY BEHAVIORAL FINANCE THEORYPrinciples Build efficient portfolios that maximizereturn for a given level of risk Diversification brings risk reduction Analysis of the ways investors think andbehave Analysis of common investor biasesImplications forthe Investor One unique rational investor with asingle risk tolerance estimate Investors have multiple goals and differentapproaches to risk depending of theirgoalsRelevantIllustrationInvestor preferences and biases Loss aversion Mental accounting Overconfidence Overreaction Belief perseveranceSEIs Goals-Based Approach Integrating Traditional and Behavioral FinanceThe Efficient Frontier12RiskReturn1AssetAllocation 13. Investment Offering for Private Clients Allocation and Components Differ by ObjectiveMarket Growth Money MarketAlternativesEmerging Market DebtHigh Yield BondInv. Grade Fixed IncomeEmerging Market EquityInternational EquitySmall Cap EquityLarge Cap EquityInflation-Sensitive AssetsConservative Low Volatility EquityAlternativesHigh Yield BondMulti-Asset IncomeInflation-Sensitive AssetsInv.Grade Fixed IncomeMoney MarketShort Duration Bonds Stability via Money Market Income via short / medium duration bondsand multi-asset exposures Return and income via high yield/credit Alternatives/low volatility equity return/beta Global equity including emerging for growth Diverse exposures to manage through variousenvironments via Multi-Asset Accumulation Fund Emerging debt/high yield debt offer diversification Alternatives for return and risk managementFor illustrative purposes only.131AssetAllocation 14. Dynamic Asset Allocation Approach Portfolio Design0%10%20%30%40%50%60%70%80%90%100%Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10SEI Private Client Strategy - DefensiveMoney Market ShortDuration Bonds * Investment Grade Fixed IncomeHigh Yield bonds Real Estate Inflation Linked BondsManaged Volatility Equity Allocations actively managed over time as market conditions and asset-classcharacteristics change Implemented using carefully selected components consistent with strategy objectives Benefits from ongoing research and development resulting in addition of new components*For illustrative purposes only. Includes government and credit oriented funds14 15. Discovering Your Goals Matching Strategies to Investor GoalsClient Goal AClient Goal BClient Goal CDefine andPrioritize GoalsRisk ARisk BRisk CEstablish RiskMeasures to EachGoalStrategy AStrategy BStrategy CIdentify Best Strategy forGoal &amp; Risk ManagementObjective 16. SEIs Investment ApproachActive Portfolio Design2PortfolioDesign 17. SEIs Investment Philosophy: Key Tenet Past Performance Is Not a Guarantee of Future Results Ranking managers bytheir five-year returnsprovides little insight intofuture performance SEI believes that a fullassessment ofqualitative as well asquantitative factors isrequired to identify andmonitor the bestmanagersThe chart takes the top quartile of US Large Cap Equities managers based on 2002-2006 performance and tracks theirsubsequent quartile rankings over the following 5-year period (2007-2011). It also identifies where the top quartile managersover the current 5-year period (2007-2011) ranked in the previous 5-year period (2002-2006)Source: SEI, Morningstar Direct, US Large Blend Universe5 Years2002 - 20065 Years2007 - 20115 Years2007 - 20115 Years2002 - 2006# 18% of top quartile managers from2002 2006 are no longer managingwithin the Morningstar US Large BlendCategory* 46% of the top quartile managers from2007-2011 did not have a full five yeartrack record during the previous periodTopQuartileTopQuartile17%11%13%13%46%*25%16%16%26%18%#2PortfolioDesign 18. SEI Manager of Managers The ConceptManager 1 Manager 2Manager 3 Manager 4SEI Fund SEI selects specialist managers,monitors performance and riskand alters composition to adapt tomarket conditions Transparency into underlyingmanager accounts providesinsight and risk management Separate-account frameworkallows efficient manager transitionwith opportunity to controltransaction costs182PortfolioDesign 19. Portfolio Construction A Combined Building Block ApproachLooking beyond traditional approaches to investment managementin an effort to build more efficient portfolios.Large CapGrowthSmall CapGrowthLarge CapValueSmall CapValueSelectionBottom Up Stock/bond PickingCarryRisk Premium HarvestingTrendMomentum DrivenMacroTop Down Thematic ManagementStyle-based Perspective Alpha-based PerspectiveThe line between traditional and alternative asset management is blurring and many investmentmanagers are increasingly using techniques currently available in seeking to add incremental value. 20. SEIs Investment ApproachActive Investment ManagerSelection3ManagerSelection 21. Experienced Analysis 100 experiencedprofessionals worldwide 20+ years assessinginvestment firms Site visits and conferencecalls to evaluate personneland investment process Assess sustainability ofcompetitive advantagesQuantitative Analysis Focus on risk adjustedreturns Statistical process controltechniques identify skill Separate quality of decisionsfrom outcomes Analytical technology tounderstand drivers of return Risk managementassessmentQualitative Analysis Examine and understandthe investment philosophy Analyze the proprietaryinvestment process Review the teamsbackground, tenure,compensation, and otherfactors to determine stabilityand commitmentOngoing Monitoring Monitor firm and processchanges Monitor competitiveadvantages Return and risk monitoring Regular site visits andmanager calls Approved list of backupmanagersSEI Manager Selection Process Manager Discovery and SelectionSources: Investment Company Institute 2011 Fact Book; Funds Library Products and Services; FundLibrary.comUniverse ofApproximately22,000+ InvestmentProducts1,000 ManagerVisits/ContactsYear100SpecialistManagers213ManagerSelection 22. Access to all SEI specialist managers would require total client assets of nearly $1 billion!Examples of Managers Utilized in Funds and Managed AccountsManager/Headquarters Investment Mandate/BenchmarkAssets UnderManagementDirect AccessMinimumParametric Portfolio AssociatesSeattle, WAUS Large Cap Core/Tax TransitionRussell 1000$53 Billion $$1 MillionLSV Asset ManagementChicago, ILUS Large Cap ValueRussell 1000 Value$62 Billion $50 MillionBrown Investment AdvisoryBaltimore, MDUS Large Cap GrowthRussell 1000 Growth$26 Billion $1 MillionDelaware Management CompanyPhiladelphia, PAUS Large Cap GrowthRussell 1000 Growth$177 Billion $50 MillionNeuberger Berman Management, LLCNew York, NYInternational EquityMSCI EAFE$202 Billion $25 MillionLee Munder InvestmentsBoston, MassachusettsUS Small Cap ValueRussell 2000 Value$4 Billion $5 MillionThornburg InternationalSanta Fe, NMInternational EquitiesMSCI EAFE$80 Billion $25 MillionMcDonnell Investment ManagementOak Brook Terrace, ILActive Municipal BondsLehman Intermediate Municipal Bonds Index$13 Billion $5 MillionSEI - As of September 2012Managers do not set an account minimum, but rather evaluate each account on a case-by-case basis.22 23. SEIs Investment ApproachActive Portfolio Constructionand Management4PortfolioConstruction 24. Fund Construction Strategic Manager Allocation ExampleManager/Fund WeightTrackingError Alpha SourceTarget RiskContributionManager 1 30% 5.0% Risk Premium 25%Manager 2 35% 4.0% Selection 25%Manager 3 15% 8.5% Momentum 25%Manager 4 20% 6.5% Macro 25%Fund 100% 3.0% N/A 100%30%35%15%20%SEI FundStrategic Manager AllocationManager 1Manager 2Manager 3Manager 4 SEI establishes relative returnand risk expectations for theFund over the medium and longterm in a Fund InvestmentThesis It outlines which alphaprocesses will be included in theFund and what the long-termstrategic allocation should be The Fund Investment Thesisprovides a framework formanager selection and managerallocation or sizing Through the allocation todifferentiated managers, SEIseeks to construct a Fund withlower relative risk than theunderlying managersindividually4PortfolioConstruction24 25. Portfolio Construction Impact of the Economic and Market CycleSEI conducts scenario analysis on each manager to measure performance behavioracross multiple economic cyclesOutput of analysis will have an impact on the timing of manager decisions and the weightallocated to each manager in the FundManager allocations can be adjusted over time to take advantage of current economicenvironmentNOTE: The size of the quadrant denotes therelative time the economy spends within thequadrant.0.00%20.00%40.00%60.00%80.00%100.00%RiskContribution%Manager Allocation Over TimeManager 1 Manager 2 Manager 3 Manager 4SEI Manager Allocation Over TimeExpansionDistressStressRecovery254PortfolioConstruction 26. SEIs Investment ApproachActive Tax Management5TaxManagement 27. Tax Management Its Not What You Make, Its What You KeepSource: Parametric Portfolio Associates: 60% Russell 3000; 40% Barclays Capital Aggregate; No Liquidation. Interest income and dividends are taxed annuallyat historical top marginal tax rates; capital gains are realized at 50% per year and are taxed at the historical long-term capital gains tax rate at the time. Pastperformance is no guarantee of future results.A hypothetical tax-free $100,000 portfolio (invested 60% in stocks and 40% in bonds) held for 33 years would have grown to about $3.2million. If the portfolio wastaxed like an average mutual fund, it would have lost 49% of its value, due to taxes paid and earnings lost on that money. Tax-managed investment strategies aredesigned to minimize capital gains distributions and maximize after-tax returns.*As of 12/31/11. Since inception 12/2002. There is no guarantee that distributions will not be made in the future.Taxes Reduce Performance Over Time Growth of $100,000Before-Tax Portfolio:$3,174,000After-Tax Portfolio:$1,613,00049% Lost to Taxes Tax Lot Accounting Loss Harvesting Wider Rebalancing Ranges Tax-Aware Trading Gain/Loss Offset Transition of Low-cost-basisStocksSEIs Solution to the ProblemSeparate Account Results 121 bps of annualized after-tax (above the mana...</p>