These risk-profiled funds range from aggressive to defensive strategies. The lower-risk funds prioritise capital preservation, while the high-risk funds focus on the growth of assets. The portfolios are aimed at IFAs who want to outsource investment management to SEI and the administration to Cofunds. SEI says they are its usual institutional due diligence and investment processes wrapped up in a fund structure.
SEI’s investment team, headed by Kevin Barr, includes former Maia Capital and Fidelity fund of funds manager Jason Collins, who is head of UK research. The team analyses the investment processes of 70,000 managers to create a final list of 70 managers, with another 70 on a reserve list. It selects managers who specialise in particular areas of the market and focus on a specific investment style, so that the end portfolio can provide a high level of diversification, which reduces risk, and the potential for consistent returns.
SEI considers asset allocation the most important step in the investment process. It builds the funds from segregated mandates across four broad asset classes – fixed income, equities, property and liquidity, which refers to short-term money market instruments such as Treasury Bills. These broad asset classes are diversified through a range of sub-categories so that segregated mandates can that reflect different regions and company sizes. For example, the equity category could contain different mandates for UK, small Pan European and big US companies. Each portfolio is rebalanced on a regular basis to ensure that they do not stray from their stated target weights and become misaligned.
These funds could fill a gap in the market for risk-graded manager of managers portfolios, as opposed to risk-graded portfolios within discretionary fund management services and funds of funds. However, not all advisers use Cofunds and some may prefer to have some control over asset allocation using Russell Investments’ range of four manager of managers portfolios.