Sei citywire jan_2013


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Sei citywire jan_2013

  1. 1. Goals Based InvestingManaging Investor Behaviour in times of Market VolatilityJanuary 2013
  2. 2. Agenda• An Introduction to SEI• Market challenges & goals based investing• Active Management in times of market volatility 2 For Professional Client Use Only – Not for Distribution to Retail Clients
  3. 3. SEI corporate profile Representative Global Clients* SEI Key Facts* Manages £120 billion in assets Administers £156 billion in client assets Processes 1.5 million end-investor accounts as of December 2011 Offices in the United States, Canada, United Kingdom, Ireland, the Netherlands, Hong Kong, South Africa, South Korea and Dubai SEI is a publicly traded company listed on NASDAQ with approximately 2,500 employees worldwide*As of September 30, 2012. Currency calculated September 30, 2012, with an exchange rate of 1 USD to 0.6188 GBPRepresentative clients are selected by SEI to illustrate a sampling of SEI’s client base, but may not necessarily endorse all of the services provided by SEI. 3 For Professional Client Use Only – Not for Distribution to Retail Clients
  4. 4. What do your clients value most? Value to end client Advice Asset Allocation Value Asset Management Administration SEI Your Expertise Expertise or Strength Expertise For Professional Client Use Only – Not for Distribution to Retail Clients 4
  5. 5. Volatility: Elevated levels NUMBER OF 3% DAILY S&P 500 MOVES BY DECADE 120 101 100 80 60 40 25 27 18 20 4 7 0 1951-1960* 1961-1970 1971-1980 1981-1990 1991-2000 2001-2010*S&P 90 is used as the stock market index before the S&P 500 inception in 1957.Source: SEIReturns calculated in USD. Volatility in other markets may vary. For Professional Client Use Only – Not for Distribution to Retail Clients 5
  6. 6. Irrational decisions | Buy high and sell lowMarket volatility leads to fear and greed Total Global Funds ex Money Market Mutual Fund Net Sales Estimated Net Flow FTSE 100 Level 600,000 8000 Mutual Fund Net Sales in £ millions 500,000 6000 400,000 FTSE 100 Level 300,000 4000 200,000 100,000 2000 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 (100,000) (200,000) -2000 (300,000) (400,000) -4000 Mutual Fund Sales 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (net sales £ billion) (£45.0) (£258) £148 £160 £232 £263 £506 £383 £293 (£368) £472 £398 (£42.4) Sources: Morningstar, Inc., MSN Money, Yahoo Finance. Currency converted from USD to GBP on 10/8/2012 at 0.64050 British Pound per 1.00000 USD. Net flows and total returns as of December of each year. 6 For Professional Client Use Only – Not for Distribution to Retail Clients
  7. 7. Irrational decisions can lead to inferior returns Equity Fixed Income Asset Allocation Index 7.84% 8% Index Average Investor 4% 2.12% 1.34% Returns 0% Average Investor -1.27% -4% Average Investor -8% -5.73%Source: Dalbar, March 2012. Time period: one year returns for 2011. Shown in USD. The U.S. equity index is represented by S&P 500 Index, the U.S.fixed income index by Barclays Aggregate Bond Index. Average U.S. equity investor, average U.S. fixed income investor, and average U.S. Assetallocation investor results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change intotal U.S. mutual fund assets after excluding sales, redemption, and exchanges. This method of calculation captures realised and unrealised capitalgains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. Total return rate is determined by calculating the investorreturn dollars as a percentage of the net of the sales, redemptions and exchanges for each period. Past performance does not guarantee future results. 7 For Professional Client Use Only – Not for Distribution to Retail Clients
  8. 8. Implementing traditional wealth management Define and Prioritise Establish Risk Identify an Investment Goals Measures Strategy Major purchase next year Education Blended Blended Risk beginning in four Portfolio Tolerance years Retirement in 20 years 8 For Professional Client Use Only – Not for Distribution to Retail Clients
  9. 9. Implementing goals-based investments | Multiple portfolios Define and Prioritise Establish Risk Identify Best Strategy for Goals Measures to Each Goal & Risk Management Goal Objective Major purchase Preserve Defensive next year Wealth Portfolio Education beginning in four Balance Risk Moderate years and Growth Portfolio Retirement in Grow Aggressive 20 years Wealth PortfolioFor illustrative purposes only. Individual circumstances may vary.Risk Tolerance assessment takes account of factors such as age, time horizon, and capacity for loss. 9 For Professional Client Use Only – Not for Distribution to Retail Clients
  10. 10. Goals-based investing can help prevent rash decisions Goals-Based Approach can save investors from Rash Decisions Made No Increased Change Lifestyle Pool 20% 20% Fully Liquidated Delayed Portfolio 50% Investment 5% 20% Adopted a Goals- Based Approach 10% 75% Made No Change Significant Changes to Allocation The results of this analysis support the assertion that clients using a goals-based investment approach are less likely to liquidate or make other dramatic changes to their investment strategies during volatile markets.Source: 2008 – SEI Wealth Network, “Goals-Based Investing Saves Investors from Rash Decisions”. SEI Wealth Network clients measured by changes in portfolio strategy from the beginningof September to mid-October 2008. SEI Wealth Network® is an umbrella name for various life and wealth advisory services provided through SEI Investments Management Corp (SIMC).Survey conducted with US clients only. For Professional Client Use Only – Not for Distribution to Retail Clients 10
  11. 11. SEI’s Investment Philosophy: Key Tenet Past performance is not a guarantee of future resultsThe chart takes the top quartile of UK Large Cap Equities managers based on 2003-2007 performance and tracks theirsubsequent quartile rankings over the following 5-year period (2008-2012). It also identifies where the top quartile managersover the current 5-year period (2008-2012) ranked in the previous 5-year period (2003-2007)• Ranking managers by their five-year returns Top Top provides little insight into 30% 19% Quartile Quartile future performance• SEI believes that a full 25% 14% assessment of qualitative as well as quantitative factors is 16% 5% required to identify and monitor the best managers 18% 2% Based on the Morningstar universe of 1,963 UK Equity Large Cap managers # 11% of top quartile managers from 2003 – 2007 are no longer included within the Morningstar UK Equity Large 11%# 61%* Cap Category *61% of the top quartile managers from 5 Years 5 Years 5 Years 5 Years 2008-2012 did not have a full five year track record during the previous period 2003 - 2007 2008 - 2012 2003 - 2007 2008 - 2012 Source: SEI, Morningstar Direct, UK Large Cap Universe For Professional Client Use Only – Not for Distribution to Retail Clients 11
  12. 12. Investment Process | Manager selectionQuantitative Analysis Experienced Analysis• Focus on risk adjusted returns • 100 experienced professionals• Advanced statistical process control worldwide techniques to identify skill Entire Universe of • 20+ years assessing investment• Separate quality of decisions from Investment firms outcomes Products • Site visits and conference calls to• Use analytical technology to evaluate personnel and investment understand drivers of return process• Risk management • Assess sustainability of competitive assessment advantages 1,000Qualitative Analysis Manager Ongoing Monitoring• Examine and understand the Visits/Contacts investment philosophy • Monitor firm and process changes Year• Analyse the proprietary • Monitor competitive advantages investment process • Return and risk monitoring• Review the team’s • Regular site visits and manager background, tenure, calls 100+ compensation, and other Specialist • Approved list of backup managers factors to determine stability and commitment Managers For Professional Client Use Only – Not for Distribution to Retail Clients 12
  13. 13. SEI’s solution:Goals-Based Portfolios | Meeting a range of investor goals STABILITY FOCUS GROWTH FOCUS SEI’s Stability-Focused Portfolios seek SEI’s Growth-Focused Portfolios seek long- growth within a risk budgeting framework term growth in line with the broad equity and to manage the risk of loss fixed-income markets. SEI Return Expectation Fixed Income Property Equity Liquidity Absolute Return SEI Risk Expectation For illustrative purposes only 13 For Professional Client Use Only – Not for Distribution to Retail Clients
  14. 14. SEI Solution: Core FundTarget allocation weights are set at the discretion of SEI and are subject to change. As at 31 December 2012*The absolute return asset class aims to exploit active management opportunities that are not always accessible in conventional asset classes such as equity, fixed interest, cash orproperty. This could involve, for example, investing in long and short positions, to help generate profits or protect capital in both rising and falling markets.**SEI does not show individual holdings information for third party funds. For Professional Client Use Only – Not for Distribution to Retail Clients 14
  15. 15. Important InformationThis material is not directed to any persons where (by reason of that persons nationality, residence or otherwise) the publication or availability of this material is prohibited. Persons inrespect of whom such prohibitions apply must not rely on this information in any respect whatsoever. Investment in the funds or products that are described herein are available only tointended recipients and this communication must not be relied upon or acted upon by anyone who is not an intended recipient. While considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness ofany information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information. SEI Investments (Europe) Limited acts as distributor of collective investment schemes which are authorised in Ireland pursuant to the UCITS regulations and which are collectivelyreferred to as the “SEI Funds” in these materials. These umbrella funds are incorporated in Ireland as limited liability investment companies and are managed by SEI Investments Global,Limited, an affiliate of the distributor. SEI Investments (Europe) Limited utilises the SEI Funds in its asset management programme to create asset allocation strategies for its clients. Anyreference in this document to any SEI Funds should not be construed as a recommendation to buy or sell these securities or to engage in any related investment management services.Recipients of this information who intend to apply for shares in any SEI Fund are reminded that any such application must be made solely on the basis of the information contained in theProspectus (which includes a schedule of fees and charges and maximum commission available). Commissions and incentives may be paid and if so, would be included in the overallcosts. A copy of the Prospectus can be obtained by contacting your Financial Advisor, SEI Relationship Manager or by using the contact details shown below.Past performance is not a guarantee of future performance. Investments in SEI Funds are generally medium to long term investments. The value of an investment and anyincome from it can go down as well as up. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down.Investors may not get back the original amount invested. SEI Funds may use derivative instruments which may be used for hedging purposes and/or investment purposes. This materialrepresents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. SEI’s goals based strategies are available in both the SEI Strategic Portfolio Fund range and the SEI Goals Based Model range. The SEI Strategic Portfolio Funds may invest in acombination of other SEI and Third-Party Funds as well as in additional manager pools based on asset classes. These manager pools are pools of assets from the respective StrategicPortfolio separately managed by Portfolio Managers which are monitored by SEI. One cannot directly invest in these manager pools. The SEI Goals Based Models may invest in acombination of SEI and Third-Party Funds but do not invest in additional manager pools.The risk described below may apply to the underlying assets of the products into which SEI’s Strategic Portfolios and Goals Based Models invest: • Investment in equity securities in general are subject to market risks that may cause their prices to fluctuate over time. • Fixed income securities are subject to credit risk and may also be subject to price volatility and may be sensitive to interest rate fluctuations. • Bond or money market instruments are sensitive to inflation rate trends. • Property assets may be difficult to buy or sell and the impact may be that the cash remains un-invested or property is disposed at an unfavourable price. • Absolute return investments utilise aggressive investment techniques which may increase the volatility of returns. If the correlation between absolute return investments and other asset classes within the fund increases, absolute return investments’ expected diversification benefits may be decreased. • International investments may involve risk of capital loss from unfavourable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations.The SEI Strategic Portfolios and Goals Based Models are denominated in one currency but may hold assets priced in other currencies. The performance of the Funds and Models maytherefore rise and fall as a result of exchange rate fluctuations. This information is issued by SEI Investments (Europe) Limited (“SIEL”) Time & Life Building, 1 Bruton Street, 4th Floor, London W1J 6TL United Kingdom +44 (0)20 7518 8950. Thisdocument and its contents are directed only at persons who have been categorised by SIEL as a Professional Client, or an Eligible Counterparty, for the purposes of the FSA NewConduct of Business Sourcebook. SIEL is authorised and regulated by the Financial Services Authority. 15