SEI set for Europe
SEI’s investment approach has been widely supported in the US but is less well known in Europe, Addison says. It starts with a client’s attitude to risk at various points in their life. “People have different needs at different times. Yet we find that especially at the retail end of the market, investors tend to buy and sell at the wrong times.”
“What our Strategic Portfolios goals-based investing process does is focus on the client’s needs, rather than market ‘noise’, which is not relevant most of the time. The process helps investors look beyond intermittent market volatility. It is a very effective, and clients get what we are trying to do.”
Formerly head of wholesale at Scottish Widows Investment Partnership, where he oversaw the development of strategic, advisory, and discretionary business, Addison said he will be targeting large distributors, private banks, wealth managers, and large advisory firms.
“SEI has ambitious plans in the UK and Europe, where we see significant opportunities to grow our goals-based multi-manager solution,” he explained. “We realise it won’t happen overnight. A lot of US firms have come in and out of Europe but we are ready to take as long as necessary to get established and to get the right line up of product. We will be looking at local registrations and local platforms in the coming year.”
Target markets are likely to be Switzerland, Italy, Germany and the Nordics, where “the appeal for clients is the nature of the solution”. “The biggest banks will probably not a priority but we definitely feel there could be synergies with Tier 2 institutions,” he says.
While European houses are good at picking European managers, for funds of funds, a manager of managers’ approach could be a “second solution”, he explained. “Also they may have expertise in Europe but not in the US, we can use our presence as a building bloc.”
Through its subsidiaries and partnerships, SEI managed or administered (at end December 2012) $458bn in mutual fund and pooled or separately managed assets, including $201bn in assets under management and $257bn in client assets under administration.
Addison said he will also be highlighting the firm’s portfolio management expertise. “People may know of SEI as a platform but it is not well known enough that we have more than 110 portfolio managers and analysts globally, which is far deeper resource than most fund management firms.”
He characterises SEI’s offering more as a “manager of managers” than a “fund of funds”. “We prefer to run segregated mandates rather than putting clients into pooled funds, but they still get the benefit of an institutional-type investment process.”
Addison wants to use SEI’s global reach more effectively to identify new managers and fresh ideas.
“Most funds of funds fish in the same pool, the same names come up all the time. But we are looking for managers who are not so well known, because we tend to buy the manager, not the company.”
SEI looks for upper second quartile performance from its fund managers, with smoothest possible returns and minimum volatility. Where necessary, global managed volatility strategies are deployed.
Turnover of managers tends to be around 20% each year, and the firm runs a waiting list of candidate managers who have cleared initial vetting, and could step in at any point. “We not only monitor the managers we engage, but their peers who we are not engaging as well,” adds Addison.
Among European equity managers there have been no change in managers since January 2012, while there have been changes to Fixed Income in the last year.
For Addison the biggest ‘alarm bell’ is a manager drifting off mandate, or “not doing what they were hired to do”. “It is never a question of hiring and then letting go. Once they are in situ, we need to see them continuing to do what we want them to do.”
He said manager selection is rigorous, but candidates do not always need a lengthy track record to be considered, and “the business structure is less of a concern because we are not invested in their commingled funds – we have segregated mandates”.
Generally SEI commits a substantial amount of money straight up. “We back our conviction with funding, but we are aware that could be problematic for smaller funds, so we would start with a smaller segregated structure.”