SEI Strategic Portfolios Expected Range of Returns June 2016
Capital Market Assumptions for Asset Allocation Modeling Estimating and monitoring capital market assumptions (CMAs) is an integral part of SEI s strategic asset allocation process. These assumptions are designed to be long-term in nature and are intended to be a reasonable approximation for a wide range of return behaviour that asset classes can potentially exhibit through various market cycles. Estimating these assumptions requires a solid analysis of the key drivers of risk and return in each asset category. Our capital market assumptions include estimates of expected returns, return volatility, correlations, yields, active management return (alpha), and active management risk (tracking error). We also develop views on performance characteristics such as autocorrelation, skew and kurtosis particularly for those investments that deviate most clearly from the common statistical framework of normally distributed returns. Asset class assumptions are set using a combination of empirical and qualitative analysis. Empirical analysis ensures that our assumptions reflect historical performance. Our qualitative analysis is targeted towards capturing long-term trends and structural changes that are not yet reflected in the historical data. It provides an additional means for adjusting for the effect of unrealistic or unsustainable short-term valuations or trends, opting instead for return levels and behaviour that are more likely to prevail over long periods. The result of our analyses is a series of forward looking indicators that produce a realistic picture of how portfolios are likely to behave through time. Ultimately, the value of these assumptions is not in their accuracy as point estimates, but in their ability to capture relevant relationships and changes in those relationships as a function of economic and market influences. Changes in market structure and composition can cause our best thinking to deviate from historical estimates. Changes in assumptions may have a material impact on the projections presented. All projected returns are presented gross of all fees and charges and are not necessarily indicative of the future or likely performance of the portfolios, especially over a short-term time period. The CMAs are revisited on a regular basis to reflect the changes in the market environment. The forecasts shown in the pages following are not necessarily indicative of the future or likely performance of the portfolios, especially over a short-term time period.
SEI Strategic Portfolio Allocations Projections using SEI Capital Market Assumptions. SEI SEI SEI SEI SEI SEI SEI Defensive Conservative Moderate Core Balanced Growth Aggressive Fund Fund Fund Fund Fund Fund Fund Liquidity 27.50% 12.30% 1.10% 1.10% 1.00% Fixed Income 55.10% 51.40% 49.94% 40.20% 27.10% 16.00% Equity 7.30% 21.00% 34.40% 47.40% 62.70% 80.00% 100.00% Income 5.10% 7.20% 5.30% 3.10% 2.10% Inflation-Sensitive Assets 4.00% 5.10% 5.10% 6.20% 5.10% 4.00% Absolute Return 1.00% 3.00% 4.30% 2.00% 2.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Cash & Cash Equivalents 27.50% 12.30% 1.10% 1.10% 1.00% Global Short Duration Fixed Income 19.00% 15.40% 15.61% 2.70% 1.05% Global Short Term Fixed Interest 19.00% 15.40% 5.75% 2.70% 1.05% UK Fixed Income 6.10% 8.20% 10.60% 13.00% 6.20% Global Government Fixed Income 3.00% 3.10% 4.20% 5.40% 4.20% 2.00% Global Credit Fixed Income 3.00% 3.10% 4.20% 5.40% 3.10% 2.00% High Yield 5.00% 6.20% 7.48% 7.70% 6.30% 6.00% Emerging Market Debt 2.10% 3.30% 5.20% 6.00% Global Managed Volatility 7.30% 16.80% 23.56% Global Developed Markets Equity 7.40% 8.10% 10.00% 13.00% UK Equity 4.20% 10.70% 17.90% 24.30% 31.00% 39.00% US Large Companies Equity 5.90% 5.30% 6.40% 7.60% US Small Companies Equity 0.40% 2.30% 3.10% 3.90% European Equity 3.20% 3.00% 4.00% 5.00% Pan European Small Companies 1.00% 2.00% 3.00% 3.00% Japan Equity 2.10% 3.00% 3.00% 4.00% Pacific Basin Ex-Japan Equity 1.00% 2.00% 2.00% 3.00% Emerging Market Equity 2.10% 5.10% 8.00% 10.00% Factor Allocation US Equity 6.40% 7.60% 9.50% 11.50% Multi-Asset Income 5.10% 7.20% 5.30% 3.10% 2.10% Commodities 2.00% 3.00% 3.00% 4.00% 3.00% 2.00% Inflation-linked bonds 2.00% 2.10% 2.10% 2.20% 2.10% 2.00% Liquid Alternatives 1.00% 3.00% 4.30% 2.00% 2.00% TOTAL 100% 100% 100% 100% 100% 100% 100% Expected Returns 3.10% 4.30% 5.30% 6.50% 7.30% 8.10% 8.50% Expected Standard Deviation 3.40% 5.80% 8.20% 12.00% 14.70% 17.60% 20.00% Drawdown Risk Budget -10% -20% -30% The SEI Strategic Portfolios may invest in a combination of 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. Asset allocations represent strategic long-term baseline allocations as of 30 June 2016. Allocations subject to change. For information on the current target active allocations, please see appendix.
Returns Expected range of returns Standard Deviation 9.0% SEI Strategic Portfolios Aggressive 8.0% Balanced Growth 7.0% Core 6.0% 5.0% 4.0% Conservative Moderate Growth-Focused 3.0% Defensive 2.0% Stability-Focused 1.0% 0.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Standard Deviation Source: SEI. Allocations subject to change; as per 30 June 2016. Projections using SEI Capital Market Assumptions
Expected Range of Returns Over a Twenty-Year Time Period 5
Expected Returns Expected Range of Returns Defensive Fund 7.0% 6.0% 5.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 4.0% 95% 3.0% 3.1% 50% Percentiles 2.0% 5% 1.0% 0.0% -1.0% -2.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Conservative Fund 12.0% 10.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 8.0% 95% 6.0% 4.0% 2.0% 4.3% 50% 5% Percentiles 0.0% -2.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Moderate Fund 16.0% 14.0% 12.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 10.0% 8.0% 95% 6.0% 5.3% 50% Percentiles 4.0% 2.0% 5% 0.0% -2.0% -4.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Core Fund 20.0% 15.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 10.0% 95% 6.5% 50% Percentiles 5.0% 5% 0.0% -5.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Balanced Fund 25.0% 20.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 15.0% 95% 10.0% 7.3% 50% Percentiles 5.0% 5% 0.0% -5.0% -10.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Growth Fund 30.0% 25.0% 20.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 15.0% 95% 10.0% 8.1% 50% Percentiles 5.0% 5% 0.0% -5.0% -10.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Returns Expected Range of Returns Aggressive Fund 35.0% 30.0% 25.0% Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 20.0% 15.0% 95% 10.0% 8.5% 50% Percentiles 5.0% 0.0% 5% -5.0% -10.0% -15.0% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Time Horizon (Years) The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
Expected Range of Returns Over a Three-Year Time Period 13
Expected Returns SEI Strategic Portfolios Projections Using SEI Capital Market Assumptions 35.0% 30.0% 25.0% Expected Range of Returns 3-Year Time Horizon Figures are gross and based in GBP Source: SEI s Capital Markets Assumptions for asset class returns, risks and correlations. 20.0% 15.0% 10.0% 5.0% 0.0% 3.1% 4.3% 5.3% 6.5% 7.3% 8.1% 8.5% 95% 50% 5% Percentiles -5.0% -10.0% -15.0% Defensive Conservative Moderate Core Balanced Growth Aggressive The 95th percentile represents the value below which 95% of outcomes fall. The 50th percentile is the median value where half the outcomes are higher and half the outcomes are lower than that value. The 5th percentile represents the value below which 5% of outcomes fall. Source: SEI. Allocations subject to change; as per 30 June 2016. Current Standardised performance is available on request.
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Appendix
SEI Strategic Portfolio Target Allocations Current column represents each Funds target active allocation. A blue-shaded cell (white font) represents an overweight position; a grey-shaded cell (black font) represents an underweight position versus the strategic weight. All targets are as at 30 June 2016. Allocations subject to change. *Obtained by investing in a hedged Sterling-denominated share class of the SEI Japan Equity Fund or SEI European (ex-uk) Equity Fund combined with a long U.S. dollar/short sterling currency forward designed to neutralize unintended currency effects
SEI Strategic Portfolio Target Allocations Current column represents each Funds target active allocation. A blue-shaded cell (white font) represents an overweight position; a grey-shaded cell (black font) represents an underweight position versus the strategic weight. All targets are as at 30 June 2016. Allocations subject to change. *Obtained by investing in a hedged Sterling-denominated share class of the SEI Japan Equity Fund or SEI European (ex-uk) Equity Fund combined with a long U.S. dollar/short sterling currency forward designed to neutralize unintended currency effects