SEI and the SEI Global Fixed Income Team
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SEI | Who We Are
SEI is a leading global provider of wealth management solutions. We help professional wealth managers,
institutional investors, and private investors create and manage wealth – and enable their long-term successby providing solutions that are both comprehensive and innovative.
A Market Leader
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SEI Advisor Network
assets1
Administers $394 billion
Manages $162 billion assets1
Processes 1.5 million end-investor accounts3
#1 global provider of Bank Trust technology
9 of the 20 largest North American banks are
clients
A Successful Company
• Founded in 1968, a public company since
1981 (NASDAQ: SEIC)
• 2009 revenues: $1.0 billion2
• 2009 net income: $174 million2
• Market capitalization: $3.5 billion2
• 16 years of experience in providing outsourced
solutions to advisors
• Over 6,000 Advisors using SEI’s Solution
• Over 170,000 end-client accounts
• $30.2 billion in advisor’s AUM1
• One stop accountability with SEI Private
Trust Company
• 500+ dedicated professionals supporting
the SEI Advisor solution
• SEI is the #1 Third-Party Managed Account
Provider4
A Global Company
• 2000+ employees
• Operate from numerous offices worldwide
1Assets
as of March 31, 2010
As of December 31, 2009.
3End-investor accounts as of December 31, 2008
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2010 Summary
Associates
* Assets as of December 31, 2009.1Q
End-investor
accounts –asCerulli
of December
31, 2008
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SEI | Financially Strong with Security of Your Assets
Financially Strong
• SEI does not rely on the market to provide daily liquidity to fund our operation
• SEI does not take principal risk nor does it actively trade the assets on our balance sheet
• SEI does not use leverage within our balance sheet
• SEI does not underwrite the risk of ‘trading’ or ‘leverage’ through lending or insurance
underwriting activities
• Our balance sheet has strength reflected through cash available, highly collectable
receivables, and no direct issued debt
Security of Your Assets in SEI’s Private Trust Company
• Since the SEI Private Trust Company (SPTC) is a trust institution – not a bank or
brokerage firm – your assets are segregated from SEI’s and they are custodied in the
investor’s name. This means, trust company creditors have no claim to your assets,
assuring their protection
• SEI Private Trust Company, like other trust companies, may not pledge, lend, or margin
assets that are held in custody
• Providing a final layer of protection, our funds are regularly audited by independent and
internal auditors and are subject to routine examination by the federal Office of Thrift
Supervision
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About SEI | Key SEI Business Segments
Private Banks
Institutional Investors
Financial Advisors
A Leading Provider of:
A Leading Provider of:
A Leading Provider of:
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• Investment Programs
• Administration &
Technology
• Practice Management
Custody Services
Account Administration
Statement Production
Performance Reporting
9 of the 20 largest North
American banks as clients
Corporate Plans
Unions/Taft-Hartley
Endowments
Foundations
Healthcare
Plans > $20 Million
6,000 Advisors with $30.2 billion in
advisor’s AUM
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Client Process and Investment Philosophy
Matching Client Objectives with the Appropriate Risk Measure and Portfolio Implementation
Identify Client Objectives
Identify Relevant Risks
Identify Appropriate Portfolios

Structured
Asset
Allocation
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Efficient
Portfolio
Construction
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Manager
Selection
Continuous
Portfolio
Monitoring

Tax
Management
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Laddering Bonds with SEI Global Fixed Income Team
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What is a Bond Ladder?
Laddering involves building a portfolio of bonds with staggered maturities
so that a portion of the portfolio will mature each year. This allows for more
predictable, consistent cash flows.
Laddering tends to outperform other bond strategies because it simultaneously
accomplishes two goals:
• Captures income with less market price risk.
• Reinvests principal from maturing limited-term bonds (low yielding bonds)
into new longer-term bonds (high yielding bonds).
Goal:
To achieve a total return over all interest rate cycles that compares
favorably to the total return of a long-term bond
…but with less market price and reinvestment risk
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Sample of a Laddered Bond Portfolio
Today
$200,000
Year –to-Maturity (YTM) = 5 Years
2013
$200,000
2012
$200,000
2011
2010
2009
End of Year
$200,000
$200,000
$200,000
2014
2013
Reinvest the
principal (2009 Bond
Matures @ 200K)
into new bond with a
maturity date 5 years
out (2014)
2012
2011
2010
$200,000
$200,000
$200,000
$200,000
The goal of a laddered bond portfolio is:
• To protect principal
• Reduce reinvestment risk
• Reduce volatility in all interest rate cycle
• Create certainty of cash flows
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Institutional vs. Retail Pricing
The True Cost of Retail Bonds
Consider the Following Example
When fixed income needs are implemented through SEI’s Fixed Income Desk, it’s
like buying the bonds right from the wholesaler, before the heavy markups begin.
TYPICAL BOND LADDER
Institutional Market
Provides bonds to broker/firm for inventory. Broker marks up the price of the
bonds.
Broker/Firm
Bonds are sold to investor from the firm's inventory.
Investor
The investor purchases bonds that have markup fees included in the price of the
bond, which may not be disclosed. Markups also result in lower yields.
SEI BOND LADDER: NO BROKER INTERMEDIARY WITH SEI
Institutional Market
Bonds purchased by SEI in institutional market for you.
Investor
Fee is based on total assets and is deducted from your account quarterly.
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SEI Institutional vs. Retail Bond Pricing:
Impact on Yield to Maturity
• Retail Market Imposes Markups on Individual Bonds
• SEI Institutional Pricing Adds Value by Delivering a Higher Yield To Maturity
This example is for illustrative purposes only. It does not take into account any management fees
charged by SEI. The management fees would decrease the yield.
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Benefits of Laddering with SEI
Stability
• Preservation of Capital
• Low volatility
• Minimal Turnover and Call Risk
Risk Management and Research
• Continuous security management
• Pre-trade compliance
• Implement a broad diversification strategy
• Increased Control over Paper (i.e. no AMT Bonds)
Customized Solution
• Investor owns bonds
• Potential for state focused/specific
Portfolio Overview and Comments
Structural Recommendations
Use proceeds to purchase notes that fit the structure of the proposed portfolios.
As is typically the case, our ability to purchase bonds which meet the appropriate
structural, quality, and maturity constraints could be impacted by market
conditions, however, construction will likely be implemented within 1 month.
Additional Comments
A passive laddered bond portfolio is the optimal strategy for a fixed income investor
who desires a high level of certainty surrounding to principal and cash flow. When
investing in a laddered bond strategy the concept of income versus return must be
understood. Although both actively managed and passive strategies consist of
income and capital gains, the focus within each strategy is different. The key focus
of a laddered strategy is the income aspect of a return. With the emphasis on
income and not total return, the portfolios turnover is lower reducing capital gains.
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Standard Pricing
• $250,000-$500,000
30bps
• $500,000-$1MM
27bps
• $1MM-$2MM
25bps
• +$2MM
20bps
Relationship Pricing
• Total Assets of $100,000,000. Pricing will be negotiated
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About the SEI Global Fixed Income Management Team
SEI Global Fixed Income Management
Department Snapshot
$7 billion AUM in fixed-income mandates
• Dollar
• Non-dollar
• Separate accounts
– Taxable
– Municipal
Our Investment Team
• Three Credit Team members
• Six Portfolio Managers
• One Operations Specialist
Integrations
• Back-office settlement and reporting
– Integrated approach to SEI Private Trust Company
– Seamless processing and transparency
• Trading Integrations
– Direct trading with the dealer community
– Relationships with over 50 broker dealers
– SGFIM Portfolio Management Analytics (PMA)
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Investment Approach
• Philosophy
• Our philosophy is conservative in nature, with an aim to achieving consistently strong
investment returns over the long term. Fundamental research provides the
groundwork for relative-value assessments. We strive to exploit inefficiencies created
by short-term technical and fundamental pressures that occasionally arise in the
marketplace.
• Team Approach
• A team structure brings leadership and experience from all individuals to shape
portfolio management decisions. We believe this environment encourages
collaborative decision-making, creating continuity within the investment process.
• Disciplined Investing
• Consistent long-term results are directly correlated to a disciplined investment
approach. This is accomplished by adhering to a rigorous and replicable riskcontrolled process.
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SEI Global Fixed Income Management:
Top Down, Bottom Up
I.
Investment Policy Committee
I.
Establishes views and outlooks on economy, interest
rates and sectors in formal weekly meeting
II.
Reviews positioning within the accounts
II. Portfolio Construction
I.
Sector allocations are established
II.
Cash flows are reviewed and matched
Investment
Committee
Portfolio Construction
III. Yield-curve positioning is refined
III. Security Selection
I.
Specialists select individual securities
II.
Evaluate relative value
Security Selection
Risk Management and Compliance
IV. Risk Management and Compliance
I.
Foundation to any portfolio
II.
Review positions in weekly credit and risk meeting
III. Monitor risk in daily exposures
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Credit Philosophy at SEI
• Strong Credit Analysis
• Credit forms the cornerstone of every investment process.
• Protection of Portfolio
• The Credit Team’s primary role is to avoid problem credits and protect the portfolio.
This is accomplished by performing rigorous research both on a company-specific
and a macro level, including the general economic and geopolitical environment.
• Credit Review
• A full credit review is completed on all investments prior to purchase. Ongoing
surveillance of approved credits and all counterparties allows the team to be proactive
in making necessary recommendations in attempt to stay ahead of the market.
• Team Approach
• The Credit Team works closely with the portfolio managers in the investment process
to maximize yield while preserving capital and enhancing the liquidity of the funds.
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Credit Review Process
Analyze and Review Fundamentals
• Financial Strength
• Profitability
• Leverage
• Liquidity - liquidity facilities, cash flows, market access
• Capital adequacy – worst case scenario
• Operating Strength
• Market share and competitive position
• Revenue diversification
• Scope
• Risk management – governance, process
• Execution expertise
• Other Qualities
• Relationship with broker-dealers
• Parent/government support
• Market access / presence
• Operating history and reputation
• Market/investor perception
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Credit Review Process
Sources
• Company Financial Statements and Investor Reports
• Annual reports
• Quarterly earnings announcements
• Company Presentations
• Earnings calls
• Investor presentations
• Industry Events
• Road shows
• Conference calls
• Conferences
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Credit Monitoring
Continuous Communication with Portfolio Managers
• Daily communication – verbal, written, electronic
• Discussions on current events pertaining to existing and potential credits
• Concerns
• Communication through database
• Internal ratings
• Special instructions
• Credit meetings
• All major events and ratings changes are discussed
• Rationale and analyses provided
• Credit strategy is discussed and recommended
• Sector and geopolitical research discussed for portfolio optimization
• Urgent matters may require immediate verbal communication with the traders
• Followed by written communication
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SEI Global Fixed Income Management Organizational Chart
Sean P. Simko ChFC
Managing Director,
SEI Global Fixed Income
Management
Portfolio Management
Daisy Lac
Portfolio
Management
Pete Bednarek
Portfolio
Management
Money Markets
Municipal Bonds
Credit Strategy
Mark Fair
Portfolio
Management
Matt Manning
Inflation Linked
& Non Dollar
Treasury/
Agency Bonds
Portfolio
Management
Tim Sauermelch
Portfolio
Management
Corporate Debt
Jeff Mihocko
Operations
Lauren Woo
Strategy &
Senior Credit
Analyst
Evette Evans
Senior Municipal
Credit Analyst
Vivian Han
Credit Analyst
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Disclosures
SEI Investments Management Corp. (SIMC) acts as investment advisor for SEI Fixed Income
Management. There is no guarantee that the goals of the strategies discussed will be met. SIMC is a
wholly owned subsidiary of SEI Investments Company.
The information provided is preliminary and for informational purposes only. Any actual implementation
would require a written advisory agreement between SIMC and the client. In the absence of such an
agreement, SIMC will not be liable for any actions taken by the client in response to recommendations in
this material.
There are risks involved with investing, including loss of principal. Bonds and bond funds generally
decrease in value as interest rates rise. There is no guarantee that the goals of the strategies discussed
will be met.
SEI Investments Management Corp(SIMC) serves as the advisor for SEI's Fixed Income Desk. SIMC is a
wholly owned subsidiary of SEI Investments Company. Neither SEI nor its affiliates provide tax advice.
Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by
you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion
or marketing of the matters addressed herein: and (iii) you should seek advice based on your particular
circumstances from an independent tax advisor.
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