Tuesday, November 29, 2011
SEI Overlays a New Layer of Mutual Fund Structure
Reported by Neil Anderson, Managing Editor
just launched what it claims as industry first. Today the Oaks, Pennsylvania-based turnkey outsourcer unveiled the addition of an overlay manager, Parametric Portfolio Associates
, that will aggregate the model portfolios of the sub-advisors of SEI's Tax-Managed Large Cap Fund
with the aim of lowering the mutual fund's tax exposure.
"Given the uncertainty around taxes, investors are increasingly focused on overall investment returns on an after-tax basis," stated Kevin Crowe
, head of product development for the SEI Advisor Network.
Though such an overlay strategy is new for SEI's mutual funds, the firm has included an overlay manager since 2000 in its separately managed accounts, which now boast more than $5 billion in assets under management.
Company Press Release
OAKS, PA--(November 29, 2011) - SEI (NASDAQ: SEIC) announced today a ground-breaking approach to its already successful Tax-Managed Large Cap Fund, intended to improve the Fund's tax-management. SEI will continue to serve as a manager-of-managers and oversee the sub-advisers responsible for recommending the purchase and sale of securities of the Fund. However, under the new structure, the sub-advisers will submit a model portfolio to an overlay manager. The overlay manager will be responsible for aggregating the model portfolios with limited authority, with a goal of decreasing the Fund's overall tax exposure and providing greater after-tax returns for investors. Although SEI has used an overlay manager for its separately managed accounts since 2000, this represents the first time an investment company has implemented this type of tax-management structure in a multi-man ager mutual fund.
This strategy reflects a growing interest in after-tax returns among financial advisors and investors. While historically tax management has been viewed as an end-of-the-year item, SEI's new approach enables tax-sensitive investing throughout the year. In a recent SEI Quick Poll, more than three-quarters of financial advisors said that proactively managing for taxes is a key consideration when making investment decisions for clients. Additionally, advisors validated that tax management investing is a worthwhile strategy. Nearly one in three advisors said they can preserve an additional six percent of their clients' wealth annually by managing for taxes.
"We're proud to deliver another industry-first by offering mutual fund investors the same tax management structure that our separately managed account investors have appreciated for more than a decade," said Kevin Crowe, Head of Product Development for the SEI Advisor Network. "Given the uncertainty around taxes, investors are increasingly focused on overall investment returns on an after-tax basis. This approach truly takes tax-efficient investing to the next level within a mutual fund structure."
Traditionally, SEI's Tax-Managed Large Cap Fund allocated only a portion of the Fund's assets to a sub-adviser for more extensive tax management. Under this structure, the remaining assets of the Fund were not subject to the same degree of tax management. The new "overlay" structure allows the overlay manager to supervise the impact of the taxes for the entire Fund by implementing the model portfolios submitted by other sub-advisers. The overlay manager seeks to manage the impact of taxes by, among other things, selling stocks with the highest tax cost first, opportunistically harvesting losses, and deferring recognition of taxable gains, where possible.
"This is a true innovation and there is nothing else like it on the market. Given the heightened focus on taxes, it's an appropriate time to launch this new investment structure. A tax-managed mutual fund will be a smart way for me to help clients keep more of what they earn from their investments," said Rich Graham of Eley-Graham Financial Services in Merrillville, Indiana. "As an advisor, this will be a real differentiator for me, as I will now be able to proactively offer my clients a leading-edge solution for a challenge facing every investor."
SEI will use Parametric Portfolio Associates as the Fund's overlay manager. Parametric has been a manager within the Tax-Managed Large Cap Fund since its inception and has demonstrated the ability to use successful tax management strategies under the previous structure. SEI's new overlay structure is similar to its Integrated Managed Accounts Program (IMAP), which has already been successful for larger individual securities-based separate accounts. SEI's Managed Account Programs have more than $5 billion in assets under management.
About The SEI Advisor Network
The SEI Advisor Network provides financial advisors with turnkey wealth management services through outsourced investment strategies, administration and technology platforms, and practice management programs. It is through these services that SEI helps advisors save time, grow revenues, and differentiate themselves in the market. With a history of financial strength, stability, and transparency, the SEI Advisor Network has been serving the independent financial advisor market for more than 16 years, has over 5,800 advisors who work with SEI, and $28.8 billion in advisors' assets under management (as of Sept. 30, 2011). The SEI Advisor Network is a strategic business unit of SEI. For more information, visit www.seic.com/advisors.
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2011, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $395 billion in mutual fund and pooled assets or separately managed assets, including $162 billion in assets under management and $233 billion in client assets under administration. For more information, visit www.seic.com.
For those SEI Funds which employ the 'manager of managers' structure, SEI Investments Management Corporation (SIMC) has ultimate responsibility for the investment performance of the Funds due to its responsibility to oversee the sub-advisers and recommend their hiring, termination and replacement. SIMC is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCo.) SIMC and SIDCo are wholly owned subsidiaries of SEI Investments Company.
To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Funds' prospectuses, which may be obtained by calling 1-800-DIAL-SEI. Read it carefully before investing.
There are risks involved with investing, including loss of principal. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results.
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