Portfolio Enhancement Summary The following is a summary of SEI Mutual Fund manager changes, the rationale behind these changes and an overview of the new managers. Summary: Manager Additions Fund(s) Impacted Subadvisor Name Rationale SIIT Intermediate Duration Credit Income Research & Mgmt. Distinct philosophy and process to help fund achieve goal SIIT Intermediate Duration Credit Legal and General Distinct philosophy and process to help fund achieve goal SIIT Intermediate Duration Credit Logan Circle Distinct philosophy and process to help fund achieve goal SIIT Emerging Markets Equity RWC Asset Advisors Integrated top-down framework Summary: Manager Terminations Fund(s) Impacted Subadvisor Name Rationale SIIT Emerging Markets Equity Everest Capital Turnover of key investment professionals 2015 SEI 1
Income Research and Management Located in Boston, Income Research & Management is a privately held firm that specializes in the management of investment-grade fixedincome portfolios. The firm was founded in 1987 by John Sommers and his son, Jack Sommers. John Sommers was previously President and CEO of Putnam Advisory and Director of its Fixed Income Department. The Sommers family owns a majority of the firm, while employees own the balance. As of September 2014, IRM manages $45.3 billion in assets, with total dedicated credit assets under management of $9.4 billion. Income Research & Management (IRM) has a philosophical bias toward high-quality well-structured bonds and seeks opportunities in areas that are often overlooked by larger managers, which results in greater exposure to securities that are underrepresented in their benchmarks. Such securities can often trade at relative discounts to similar quality offerings. Identifying and capturing this premium is a notable part of IRM s value proposition. Additionally, municipal credit expertise supports the implementation of taxable municipal fixed income strategies, which are well integrated with IRM s taxable portfolio strategies and avoid the siloed structure of many peers. The IRM investment process emphasizes bottom-up security selection and portfolio construction is designed to enhance income while protecting principal. The firm s security-selection process begins with a screening of each sector to uncover undervalued bonds, with sector-specific analysis applied to narrow down the universe of issuers and bonds. In the credit sectors, lower-quality, illiquid or politically risky bonds will be eliminated. Corporateand municipal-sector bonds are eliminated if fundamentals are deteriorating or if event risk makes the bonds difficult to value. Bonds are qualified by level of seniority or subordination as well as put and call features, with a preference for seniority and call protection. The credit and structural features are valued by analysts and compared with market alternatives. The bonds with the best relative values are selected for inclusion in the portfolio and are typically held until better opportunities are identified or fundamentals change. In addition to security selection, the firm also seeks to add value through opportunistic sector rotation. This is typically done through overweighting non-treasury sectors at points of extreme undervaluation. Position targets are set for each issue and sector to assure proper implementation and low dispersion across accounts. 2015 SEI 2
Legal and General Legal & General Investment Management America, Inc. was established in 2006 as a subsidiary of Legal & General Group plc, a publicly traded (FTSE) company. As of October 31, 2014, Legal & General manages over $108 billion in assets for clients that include pension plans, foundations & endowments, unions and public funds. Legal & General Investment Management America s (Legal & General) operates on the belief that creditrisk management is a more enduring source of value than interest-rate risk management. Further, the firm believes that the investment-grade corporate bond market is the most inefficient sector within the investment-grade universe, driven by the widespread use of these inaccurate credit ratings in regulatory and investor guidelines. Because of their beliefs, Legal & General tightly controls duration and yield curve exposures while seeking to consistently add value through security selection and sector rotation. Legal & General s investment process combines both security and sector selection, driven by topdown and bottom-up analysis. In order to formulate top-down views, Legal & General leverages its global resources, including investment professionals at London-based parent company Legal and General Group Plc, which conducts monthly economic and credit-strategy meetings in which it focuses on economic trends, investment themes, credit-quality changes and regulatory actions. The combination of views produced by these meetings and analyst perspectives drives asset allocation, credit-quality and industry weights as well as key thematic over and underweights. The firm s security-selection process involves input from daily calls to personnel in London as well as weekly in-depth sector reviews. Legal & General s credit analysts perform in-depth fundamental analysis to develop proprietary earnings models and competitive analysis for each security. Critical factors such as bond covenants, event risk and a candidate s relation to bond holders are also evaluated, while relationships with candidate-company management enable Legal & General to gain insights into company strategy and capabilities. Legal & General is tactical when it comes to selling or reducing a position in a security, and is comfortable moving between overweight, underweight and neutral as market conditions change. 2015 SEI 3
Logan Circle Logan Circle is an institutional asset management firm that was founded in 2007 as a lift out from Delaware Investments and was acquired by Fortress Investment Group LLC in February 2010. As the asset management arm of Fortress Investment Group, Logan Circle provides institutional clients actively-managed investment solutions across a wide range of fixed income strategies. Logan Circle is headquartered in Philadelphia, Pennsylvania. As of November 2014, the company manages $32.1 billion assets. Logan Circle Partners (Logan Circle) investment philosophy is based on bottom-up fundamental analysis, with the goal of capitalizing of inefficiencies at the individual-security level resulting from credit, prepayment and liquidity risks that may be misunderstood. The firm believes that the corporate bond market offers premium-return potential that can only be captured through extensive credit research. To generate consistent return without incurring undue risk, the team focuses on proprietary, indepth fundamental research, capital-structure and covenant analysis and detailed reviews of management and industry trends, to target durationneutral portfolios with attractive risk/reward characteristics. Logan Circle s investment process integrates skill in research, trading and portfolio management. Investable ideas are further reviewed by specialist researchers in a manageable number of industries and sectors. The majority of research is performed in house using bottom-up analysis of financial statements, industry trends and capital structure. Portfolio-candidate selection is largely qualitative, emphasizing fundamental research and valuation to determine if the candidate has the ability to generate excess return. Once approved by the resarch team, the investment team will perform further analysis to determine if the security will meet relative-value, total-return potenial and horizon analysis requirements. The portfolio construction process is diligent, with every bond having a specific role in the portfolio. For example, the portfolio may consist of bonds with expected ratings upgrades due to improving fundamentals, or undervalued bonds experiencing a special situation (such as an industry consolidation), which have an intermediateinvestment horizon. Logan Circle will sell a security if there is a negative change in fundamentals, a price target is reached or if a better opportunity arises. 2015 SEI 4
RCW Asset Advisors RWC is an independent investment manager established in 2000 and headquartered in London. The firm managed approximately $9.7 billion as of February 2015. Each team at RWC operates as a boutique, which RWC provides with compliance, marketing and distribution support so the investment professionals can focus on their portfolios. The Team targets growth opportunities in stocks trading at reasonable prices with an emphasis on smaller emerging and frontier markets. A focus on liquidity in its underlying opportunity set is central to the investment philosophy. The emphasis placed on top-down factors is especially important given the high correlation of a stock s performance to countrylevel returns, especially within frontier and smaller emerging countries, as well as the wide dispersion among country returns. Rather than using a benchmark as a starting point, the Team s investable universe is defined through top-down macro analysis (both quantitative and qualitative), coupled with liquidity and market-cap screens across more than 100 countries. Top-down macro analysis initially helps to define the universe and direct analyst research. Through this process, the team aims to identify tailwinds and headwinds to position the portfolio toward favorable return factors including strength of the business cycle, inflation management, foreign-exchange reserves, current account balance, fiscal policy, fiscal balance, GDP growth prospects, bank-lending prospects, monetary policies and more. Currency risk is also of particular importance and provides the team with outlooks for local interest rates and currency valuations. While top-down research drives the agenda, bottomup research builds the portfolios. The defined topdown investable universe is typically sorted by geography and sector, and then screened based on financial metrics relevant to the country, sector or theme under consideration. Financial metrics used in the bottom-up fundamental process include potential revenue and earnings growth, margins, balance sheet and liquidity constraints, as well as return on capital relative to peers. Qualitative metrics include company and management credibility, relative market position, market and product opportunity, revenue and earnings visibility, management s 2015 SEI 5
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of the SEI Funds. SEI Investments Management Corporation (SIMC) is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCO). SIMC and SIDCO are wholly-owned subsidiaries of SEI Investments Company. For those SEI Funds which employ the manager of managers structure, SEI Investments Management Corporation has ultimate responsibility for the investment performance of the Fund due to its responsibility to oversee the sub-advisers and recommend their hiring, termination and replacement. To determine if the Fund(s) are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund's full or summary prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read it carefully before investing. In addition to the normal risks associated with equity investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification may not protect against market risk. 2015 SEI 6