The Q1 2016 Mid-quarter market rebound delivered relief for SEI‟s Growth-Focused Strategic Portfolio for investors the quarter; SEI active management added value at multiple levels

The first quarter of the year was a genuine “game of two halves”: 6 weeks of risk aversion were swiftly followed by a resounding rebound in risk assets. SEI‟s asset allocation approach, which seeks to build „all-weather‟ portfolios that may deliver results across a variety of economic environments, delivered tangible benefits to investors over the quarter.

The Growth-Focused Strategic Portfolios (the Core, Balanced, Growth, and Aggressive Funds) delivered positive returns (in GBP, net of all fees) in February and March, ending the quarter modestly up after a difficult January. A majority of the equity asset classes outperformed over the quarter, in part from strong stock selection by the managers, in part through manager allocations shifts by SEI, largely shifting towards managers with a security valuation focus. Compared to similar Lipper categories, the SEI Strategic Portfolios delivered highly competitive returns over the quarter across the range of risk profiles.

Overall, SEI‟s outlook remains unchanged. The view that the recent volatility represented a mid-cycle correction and not a prolonged bear market seems to have proven correct. SEI believes a modest global economic growth scenario is likely to persist and that risk assets could make progress from current levels, supporting the active positions across the SEI Strategic Portfolios.

Investment discipline remained crucial during the quarter; knee-jerk reactions at the wrong time will have proven costly to many investors. Considering time horizon and risk profiles, growth-focused and equity market investors that added to their positions during the period of maximum anxiety in the markets, as has often proved the correct strategy, should have reaped significant benefits.

Market Overview

The first quarter was a quarter of firsts, including: the first instance of negative-yielding 10-year government bonds by a major economy (Japan), the first time WTI oil prices fell back to their 2003 levels, and the worst first ten trading days of the New Year in history (as measured by the performance of the S&P 500 and the S&P 90, its predecessor, since 1928). In terms of global markets, the quarter was defined by two distinctly contrasting periods – six weeks of acute risk aversion as investors fretted over the prospect of a deeper economic slowdown and central banks‟ diminishing arsenal of stimulus measures, followed by a steep rebound supported by stabilising commodity prices and accommodative central bank policy and rhetoric.

Central banks also made headlines; the Bank of England (BOE) and the US Federal Reserve (US Fed) ― the most hawkish pair of major central banks ― toned down their monetary policy efforts during the quarter. The BOE registered two unanimous votes to hold benchmark rates firm, while the US Fed tentatively confirmed expectations for fewer rate hikes this year than previously projected.

The European Central Bank (ECB) and Bank of Japan (BOJ) ― the more-dovish pair ― deepened commitments to stimulus, with the latter adopting a negative benchmark rate, while the former treaded further into negative interest rate territory and expanded its asset purchase programme. Meanwhile, the People‟s Bank of China (PBOC) guided the yuan-US dollar exchange rate lower, made a significant capital commitment to its banking system, and rebalanced its reserve requirement ratio by ending preferential treatment for some banks.

The US employment picture improved during the quarter, with notable earnings increases in January and March, large payroll additions in February and March, and a slow-but-steady increase in the labour market participation rate. Revised fourth quarter economic growth registered an annualised 1.4%, an improvement due to increased consumer spending on services.

Eurozone services sector growth improved over the full quarter, weakening in February before gaining impressively in March. Manufacturing activity followed a similar path, with a more protracted growth slowdown during February and a March reacceleration. Fourth quarter economic growth held at 0.3%, and 1.6% year-over-year.

UK manufacturing muddled through the first quarter, with growth sliding to a 34-month low in February and recovering only marginally in March. Retail sales began the year with a jump in January, followed by a small slide in February; retail sector surveys indicate February‟s weakness could continue into March. Fourth quarter economic growth was revised slightly higher, to 0.6%, and 2.1% year-over-year, due primarily to household consumption.

SEI’s Growth-Focused Strategic Portfolios – Selected Asset Class Performance

Global Developed Equity asset class: The bears awoke in January from several months of hibernation bringing volatility and plunging prices for stocks and commodities. Yet central bankers and bargain hunters were able to lead them back to their caves and repair the damage done. Manager positioning and currency bets benefitted from the turmoil. The value managers – Jupiter Asset Management in the UK and Acadian Asset Management in Japan – outperformed as UK investors rotated into Risk Premium, while a defensive bias in Japan was rewarded with investors losing confidence in Abenomics. Jennison Associates‟ trend-following, momentum-based process was unsurprisingly a notable laggard given the trend reversal during the quarter.

US Large Companies Equity asset class: US equities had one of their worst starts ever to a year, but this was erased by an extensive rally that began in mid-February on the back of dovish Fed comments and speculation of oil production freezes that helped oil bounce off 13-year lows. In this market of extremes however, SEI‟s active management process and its sub-advisers did not fare well as security selection proved troublesome. Quality growth specialist Jackson Square Partners detracted the most, as it struggled with specific stock selections in Healthcare; Waddell & Reed Investment Management Company also had poor selection in the sector. Meanwhile, value manager AJO was caught offside, particularly in January, with poor selection in Energy.

UK Equity asset class: As is often the case with sharp rebound rallies of this nature, the rally was led by higher risk, oversold, commodity and energy-related stocks. This created a headwind for the asset class as momentum manager Los Angeles Capital Management (LACM) is significantly underweight commodity-heavy sectors. This underperformance was wholly offset by stock selection from Jupiter Asset Management (Jupiter) and Lindsell Train, who had a number of Consumer Discretionary holdings that benefitted from positive results, a re-rating of valuations, and weakness in sterling that particularly helped exporters. In mid-February, alpha source re-positioning was implemented to include a shift away from Momentum and towards Risk Premium with corresponding allocation changes to LACM and Jupiter, respectively.

Manager Changes

AQR Capital Management (AQR) was added to the investment used to access the US Small Companies Equity asset class effective 28 January. SEI made the decision to remove JP Morgan Asset Management  (JPM) from

the investment used to access Japan equities as at 2 February 2016 in response to personnel changes. Metisq Capital (Metisq) was removed from the product used to access the Pacific Basin Ex-Japan Equity asset class as at 25 March 2016. Metisq‟s parent company has chosen to discontinue their investment strategy. Assets formerly managed by Metisq have been reallocated to State Street Global Advisors, a temporary new manager SEI is using within the asset class.

Outlook

One of SEI‟s bedrock macroeconomic assumptions has been that the world will avoid a generalised recession, managing to continue muddling through. SEI believes a synchronised global recession that drags most countries into negative gross domestic product territory remains a low-probability event, and that the rally in risk assets should be able to build on itself.

SEI thinks too much emphasis has been placed on the weaknesses of the global economy, while the brighter spots have been mostly ignored. Most major countries remain in an expansion phase despite sustaining a growth scare over the past year. The main areas of concern can be found in emerging markets, especially in commodity-producing countries, although data from China is showing signs of improving and the weaker dollar should also be supportive.

The bottom line: SEI continues to believe that global economic growth will grind its way higher, led by the advanced and commodity-consuming emerging economies. Support to this is provided by central bank policies that will likely remain highly expansionary on a global basis. Even in the US, where economic growth and inflation appear more entrenched than in most other countries, it is unlikely that interest rates will be pushed higher in an aggressive manner.

Given the economic and political uncertainties, markets will remain difficult to navigate. SEI leans in a bullish direction, confident that the world economy will exhibit modest growth and that central banks around the world will do “whatever it takes” to coax their economies to grow and push inflation in an upward direction. The Growth-Focused Strategic Portfolios remain positioned for this continued moderate global growth scenario, making ongoing active management decisions to seek to add value to clients who are investing for longer term goals.

Important Information on Performance

Past Performance is not a guarantee of future performance. Standardised performance is available upon request. All data is as at 31 March 2016.

Asset class performance discussed is based on the majority SEI fund underlying the asset class. This does not include analysis of the manager pools, hedged share class investments within SEI Funds, additional SEI funds or any third-party funds within the Strategic Portfolios. As a result, performance for the total asset class allocation may vary. Not all asset classes discussed are included in all Strategic Portfolios.

Important Information

This document and its contents are directed only at persons who have been classified by SEI Investments (Europe) Limited as a Professional Client for the purposes of the FCA Conduct of Business Sourcebook.

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.

The SEI Strategic Portfolios are a series of the SEI Funds and may invest in a combination of other SEI and Third-Party Funds as well as in additional manager pools based on asset classes. These manager pools are pools of assets from the respective Strategic Portfolio separately managed by Portfolio Managers which are monitored by SEI. One cannot directly invest in these manager pools.

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.

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 not get back the original amount invested. The risks described below may apply to the underlying assets of the products into which the Strategic Portfolios invest:

•  Investment in equity securities in general are subject to market risks that may cause their prices to fluctuate over time.
•  Fixed income securities are subject to credit risk and may also be subject to price volatility and may be sensitive to interest rate fluctuations.
•  Absolute return investments utilise aggressive investment techniques which may increase the volatility of returns. If the correlation between absolute return investments and other asset classes within the fund increases, absolute return investments‟ expected diversification benefits may be decreased.
•  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.

The Funds are denominated in one currency but may hold assets priced in other currencies. The performance of the Fund may therefore rise and fall as a result of exchange rate fluctuations.

Whilst 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.

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