While corrections and bear markets are a normal part of investing, investors do not like to lose 10%, 20% or possibly more of their assets associated with these types of declines. One way to help dampen the impact of market downturns is to invest in managed volatility strategies that focus on more-stable companies with less potential downside risk. Exhibit 1 shows cumulative performance from 1 October to 31 December 2018 for the SGMF Global Managed Volatility Fund, the MSCI World Index, and the excess return of the Fund over the Index. Despite negative absolute performance, the Fund significantly outperformed the MSCI World Index, to the tune of 4%, during the fourth-quarter market turmoil. The Fund also reduced risk, posting a more than 11% reduction in volatility (standard deviation) over the Index.

See table on page 3 for standardised SGMF Global Managed Volatility Fund – USD Inst class performance.

SEI’s Strategies

When stock prices are rising, investors often question the value of diversification in general and, more specifically, of managed volatility strategies. SEI has been a steadfast supporter of both diversification and managed volatility. We have always maintained that markets can turn quickly and that, when they do, diversification—including exposure to managed volatility—can help to soften the impact.

As a pioneer in the space, SEI offers several managed-volatility strategies that have a primary objective of realizing less volatility than the overall stock market. By doing so, we hope to experience smaller drawdowns than the market when stocks sell off. And while we don’t normally expect them to outperform the broader market in the long-term, our strategies do seek equity market-like returns. When these two objectives are met, a managed-volatility approach should produce attractive risk-adjusted returns compared to the stock market as a whole. Recent weeks have provided a clear and concise illustration of how a well-designed managed-volatility strategy can benefit investors during turbulent periods.

Important Information

Investments in SEI Funds are generally medium- to long-term investments. The value of an investment and any income from it can go down as well as up. Investors may get back less than the original amount invested. Returns may increase or decrease as a result of currency fluctuations. Additionally, this investment may not be suitable for everyone. If you should have any doubt whether it is suitable for you, you should obtain expert advice.

No offer of any security is made hereby. Recipients of this information who intend to apply for shares in any SEI Fund are reminded that any such application may be made solely on the basis of the information contained in the Prospectus. 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.

In addition to the normal risks associated with equity investing, international investments may involve risk of capital loss from unfavourable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Bonds and bond funds are subject to interest rate risk and will decline in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments. Narrowly focused investments and smaller companies typically exhibit higher volatility. SEI Funds may use derivative instruments such as futures, forwards, options, swaps, contracts for differences, credit derivatives, caps, floors and currency forward contracts. These instruments may be used for hedging purposes and/or investment purposes.

While considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information.

The views and opinions shown in this commentary are of SEI only and should not be construed as investment advice.

This information is issued by SEI Investments (Europe) Limited, 1st Floor, Alphabeta, 14-18 Finsbury Square, London EC2A 1BR which is authorised and regulated by the Financial Conduct Authority. Please refer to our latest Full Prospectus (which includes information in relation to the use of derivatives and the risks associated with the use of derivative instruments), Key Investor Information Documents and latest Annual or Semi-Annual Reports for more information on our funds. This information can be obtained by contacting your Financial Adviser or using the contact details shown above.

SEI sources data directly from FactSet, Lipper, and BlackRock, unless otherwise stated.