SEI recently announced it has expanded its suite of models in the US featuring Capital Group’s recently-launched ETFs and American Funds mutual funds to include 12 new tax-sensitive solutions. This is the first time Capital Group ETFs will be available in a model portfolio.
The 12 new strategies are hybrid model portfolios that combine Capital Group’s active transparent ETFs and American Funds in an effort to maximise tax-efficient equity and tax-advantaged fixed income exposures across a range of diversified strategic asset allocations.
J Womack, Managing Director of Investment Products and Personalization for SEI’s adviser business, explains the context behind the new partnership with Capital Group.
“For a long time, SEI had been known as a turnkey asset management platform provider offering a technological solution and end to end platform in the US and in other regions globally, but we are so much more,” Womack explains.
“One other thing we deliver is asset allocation advice within that offering and the actual products themselves is the third piece of our offering – making it technology, advice, asset allocation and products, typically in a multi-manager context.”
Womack joined SEI in 2018, when the firm was moving its client base to the global wealth platform and then unbundling the solution, separating advice from product implementation. “This allowed us to engage with partners such as Capital Group,” he says.
“We provide asset allocation advice blended Capital Group’s active management, whether through mutual funds or ETFs. That’s the case with our legacy offerings from 2020 or 2021 or the recent hybrid strategies. We use their products, align them to our asset allocation, and we deliver that to the market. They are the ones with the products and we own the asset allocation.”
These multi asset portfolios are in two families: one global and one more US focused for investors who want a home country bias, spanning the risk return spectrum from fixed income to full equity strategies.
“We have used ETFs since 2014,” Womack explains, saying that SEI in the US is the largest third party strategist beyond proprietary distributors such as State Street or Schwab.
The firm manages approximately USD13 billion across passive ETFs and this new partnership with Capital Group is a move into active management.
“This is the evolution of our active product line with Capital Group which aligns with their evolution as a firm as they make their strategies available in the ETF format,” Womack says.
“We are vehicle agnostic but now we see the rise of the active ETF format, which is more tax friendly; we like a format that allows the client to manage their own tax efficiently.”
Clients who choose to work with a financial adviser are looking for increased transparency aligned with the model-based allocations, Womack says. “And clients are more savvy about understanding the tax impact of capital gains, so they are asking for a tax optimised portfolio and the ETF services that role while also being low cost versus other formats.”
Womack notes that there is a number of ETF providers out there with great reputations and similar values to SEI. He says: “As a firm we are totally focused on helping our clients across all channels. We would look to use other providers where our values and our focus on the end client aligns. ETFs are a great way of providing choice.”