Based in Oaks, Pennsylvania, SEI Investment Management employs an atypical
(for mutual funds) sub-advisory structure to handle the load.
Ackerman-Schaufler leads a team of equity analysts as well as a team
dedicated to selecting and combining specialist investment managers
The home team selects and directs who does what, and security selection
is done by each of the sub-advisors
“It starts with the fund thesis,” says Ackerman-Schaufler. “We look at how
to tackle the market: Which types of inefficiencies exist, and how to best
exploit them. Emerging markets is not a stable universe – the benchmark is
quite different now than in the 1990s. There are new countries, for
example, and a higher concentration of large-caps.
“We choose managers that are best in class at exploiting those
inefficiencies,” Ackerman-Schaufler says. “Those managing their respective
sleeves may be top-down or bottom-up, quantitative or fundamental – it
doesn’t matter. Different styles go in and out of favor. If we see one
style start to benefit, we might allocate more resources to that manager,
and if we foresee difficulties, we might allocate less. But all our
sub-advisors are chosen for their skill and their approach, and they all
have mandates based on need needs of their clients.”
Ackerman-Schaufler currently works with seven managers. “We try to be
forward-looking, and since the next generation of emerging markets tends to
be very unexploited and inefficient, we last added a specialist in frontier
markets,” she says.
The resulting portfolio is effectively a blend of seven customizable
sub-portfolios covering emerging and frontier (next-generation) markets.
Geographically, two thirds of the portfolio is invested in Asia, with
another 14% in Latin America, 11.3% in Europe, and 5.4% in Africa and the
The fund is currently heavily weighted to technology (27.3%) and to
financial services (24.7%). “Investors have traditionally associated
emerging markets with commodities and infrastructure,” says
Ackerman-Schaufler. “But today, the MSCI Emerging Markets Index is
dominated by the information technology and financial sectors.”
Recent performance reflects this mix, with the fund posting a year-to-date
return (to Sept. 30) of 20.2% compared with 17.8% for the Dow Jones
Emerging Markets Total Return Index. For the 12 months ending Sept. 30, the
fund returned 17.1% compared with 16.0% for the benchmark index.
“Financials are a very localized market,” says Ackerman-Schaufler. “There
have been recent concerns about China’s banking sector, for example, but
it’s a different story in Mexico or India. It depends on locality. But one
commonality is that the financial markets in emerging nations are
underdeveloped and underpenetrated.
“Technology is by comparison a much more global trend,” Ackerman-Schaufler
says, adding that multinational technology companies such as Tencent
Holdings, Samsung Electronics, Alibaba Group, and Taiwan Semiconductor are
currently among the fund’s top holdings.
Looking down the road, Ackerman-Schaufler also sees education as a growth
industry in developing nations. “China, for instance, has a strong national
interest in education, and it’s a very competitive market,” she says.
“Parents spend enormous sums to give their children a competitive
education. There are competitive examinations for the best kindergarten
spots, for example, and tutoring is in high demand. There aren’t many
companies and valuations are rich, but that goes to the theme of education,
and the tremendous amounts being spent on children in China. It’s crucial
in Brazil too, and India, although India doesn’t have any good companies
As for frontier potential, Ackerman-Schaufler cites Vietnam as well as
Argentina: “We have a healthy exposure to Argentina. They’ve had problems,
but it’s not a question of if, but rather when, their status is upgraded.
It may be next year or two from now. Vietnam is interesting – it has
industrialization and urbanization, but doesn’t have a vast number of
companies. We want to be there when that market starts growing.”
Olev Edur is an experienced financial and business journalist and a frequent
contributor to the Fund Library.
Notes and Disclaimers
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