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SEI says absolute return too risky for defensive portfolio

Manager of manager specialist SEI believes that absolute return strategies are too risky for its defensive strategic portfolio and are unable to provide sufficiently high returns for its growth and aggressive strategic portfolios.

The firm recently decided to add Ucits II absolute return strategies to four of its risk-graded strategic portfolios – conservative, moderate, core and balanced. These portfolios are in the middle of SEI’s risk spectrum and are thought to provide a better fit for absolute return strategies than risk profiles at the lower and upper ends of the fund range.

SEI launched its strategic portfolio range in February but did not initially cover absolute return strategies. At that time, the firm felt that a focus on four broad asset classes – fixed income, equities, property and liquidity – would provide the funds with everything they needed to achieve their aims.

Lack of choice in the absolute return universe was also an issue but many Ucits III absolute return funds have been launched this year, prompting SEI’s interest in the asset class. The firm believes absolute return strategies can bring further diversification to the four portfolios in which they are included while reducing risk.

SEI has limited its foray into absolute return strategies to four areas – equity long/short, equity market neutral, credit long/short and global macro. It currently invests with one manager for each strategy, using Henderson for credit long/short, Marshall Wace for equity market neutral, GLG for equity long/short and HSBC for global macro.

Director of client investment strategy at SEI global wealth services Cedric Bucher says: “In the defensive portfolio, we do not want to take the risk as hedge fund risk is different to our model element of risk. In the growth and aggressive portfolios, the returns from absolute return strategies are not high enough – better returns are coming from long-only equities.”


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