SEI is aggressively launching new ETFs and converting some of its mutual funds to ETFs, with the latest news that it is converting its multi-strategy liquid alternatives mutual fund into an ETF: SEI DBi Multi-Strategy Alternative ETF (ticker: QALT).
The strategy targets long-term capital appreciation by replicating the return profile of leading hedge-fund strategies through a rules-based, long/short approach across equities, rates, and currencies, all managed by SEI, with Dynamic Beta Investments (DBi) as sub-adviser.
Robert Hum, Head of Investment Product Development and Activation at SEI, explains that the firm has come to ETFs relatively recently. “We are looking at new launches or conversions,” Hum says. “We have been a little late to the ETF game and now we have eight ETFs, but plan to aggressively launch in areas where we think we have an edge.”
And those areas are liquid alternatives and quantitative investing. “Given the market we have seen over the last decade with the S&P up 15 per cent on an annualised basis, people have not been looking for alternatives, but we think there will be a rise in demand for diversification in their equity exposures and these funds are here to sit alongside fixed income providing ballast.”
The mutual fund had USD180 million under management which has come over to the new ETF, but the EMEA UCITS version has over USD1 billion in assets and a track record that is coming up to 10 years.
“When we think about our mutual fund line-up we are aggressively thinking how do we bring this to more and more investors and we had a lot of requests for this from clients,” Hum says.
“It’s hard to say there is a white space in the market, but liquid alternatives don’t have a ton of options, so it’s a nice opportunity for us to bring a strategy that we have been running for nearly a decade to ETFs.”
Historically, SEI has largely focused on managing money for institutions, offering OCIO and model portfolio services, with a nearly USD15 billion alternatives platform.
“Historically we have not sold products externally and what we are trying to do is to think about our institutional capabilities for the wealth audience.”
The fund is active, that most fashionable of trends at the moment, but also systematic. Hum cites the Cerulli Associates prediction that model portfolios will be a USD4.5 billion business by 2030 and sees this product fitting comfortably in the model portfolio product.
DBi’s portfolio is 40 per cent managed futures and 60 per cent traditional multi-strategy based on other hedge fund strategies and trying to replicate the returns of the largest hedge funds in the world.
SEI’s Liquid Alternative Fund is one of the top performing multi-strategy products in the industry, Hum says, also noting that in 2022 when ETFs endured difficult market conditions, this fund was positive.
“It did what we expected it to do in those challenging times,” he says.
The new ETF is scaled and ready for allocation in larger portfolios with Hum announcing that SEI plans to expand in the ETF industry.
“The ETF market has been around a long time but we have not been aggressive in the space and I hope to see that change. We are going to be pretty aggressive in the coming 12 to 18 months.”
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