Do The SEI Funds Add Value For Investors?

Do The SEI Funds Add Value For Investors?

Do The SEI Funds Add Value For Investors?

November 17, 2015

by Larry Swedroe

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This Top Energy And Infrastructure Fund Is Bullish On U.S. Utilities

UtilitiesThe Electron Global Fund was up 2% for September, bringing its third-quarter return to -1.7% and its year-to-date return to 8.5%. Meanwhile, the MSCI World Utilities Index was down 7.2% for September, 1.7% for the third quarter and 3.3% year to date. The S&P 500 was down 4.8% for September, up 0.2% for the third Read More

The previous installment in my series evaluating the performance of the market’s most prominent actively managed mutual fund families focused on Russell, one of the largest players in the world of investment consulting (where firms provide guidance to pension plans and other institutional investors, as well as to investment advisors, on picking the best active managers). Today, we’ll turn our attention to Russell’s largest competitor in the consulting field, SEI.

Morningstar reports that, as of July 31, 2015, SEI’s mutual funds had $91 billion in assets under management, up from $57 billion in 2011. That’s almost twice Russell’s assets of $47 billion. As is the case with Russell, because of its role as a consultant, the impact SEI has on investors goes well beyond the returns of its mutual funds.

For example, in August 2015, SEI announced that their TAMP (Turnkey Asset Management Provider) business, which supports investment advisors, had reached $50 billion in assets under management. In addition, SEI’s website states that, at year-end 2014, its institutional group had $75 billion in assets under management, making the company one of the largest fiduciary managers worldwide.

In describing the resources at its disposal, SEI notes that its employs more than 320 professionals located in seven countries. Its institutional clients are supported by nearly 50 client portfolio managers/directors averaging 20-plus years of experience. In addition, SEI has nearly 100 investment professionals performing research, due diligence and implementing client portfolio investment changes and allocations.

With all of these resources, and with assets under management approaching $100 billion, you’d expect to see some outstanding performance.

My review begins with a look at how SEI ranked in Barron’s annual list of best-performing mutual fund families. For the latest 10-year period, SEI ranked 44th out of 48 fund families. The performance over the latest five-year period was somewhat better with a ranking of 31 out of 56 fund families. And in the one-year rankings, which are based on 2014 performance, the firm placed 4th out of 65 fund families, though one-year performance should be treated as anecdotal in nature.

As is my practice, in order to see how well SEI’s funds have performed for their investors, I will compare the results of their actively managed equity funds to the similar offerings from two prominent providers of passively managed funds, Dimensional Fund Advisors (DFA) and Vanguard. (Full disclosure: My firm, Buckingham, recommends DFA funds in constructing client portfolios.)

To keep the list to a manageable number of funds, and to ensure that I examine long-term results through full economic cycles, we’ll analyze the 15-year period ending June 30, 2015. Furthermore, when there is more than one class of fund available, I will use the lowest-cost shares that were obtainable for the entire period. In cases where SEI has more than one fund in an asset class, the average return of those funds is used in the comparison.

The table below shows performance data for 11 funds offered by SEI in seven domestic asset classes and two international asset classes. Funds are placed in a given asset class based on Morningstar’s investment style categorization.

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