SEI Launches Liquid Alternative Fund in Canada: A New Option for Diversification

SEI Investments Company has expanded its offerings in the Canadian market with the launch of the SEI Liquid Alternative Fund. This new fund aims to provide investors with a diversified investment strategy that can help navigate changing market conditions. With a global management team overseeing approximately CAD 2.16 trillion in assets, SEI is well-positioned to introduce this innovative fund to Canadian investors.

The SEI Liquid Alternative Fund is designed to deliver long-term capital appreciation primarily by investing in derivative instruments. It seeks to mimic the returns of a model portfolio composed of various alternative investment strategies, particularly hedge funds, while maintaining a leverage limit of 300% of its net asset value. The portfolio is structured into two major components: a multi-strategy sleeve, which is expected to represent 60% of total investments, and a managed futures sleeve.

The multi-strategy sleeve aims to approximate the average total return of the 50 largest hedge funds, equally weighted, excluding managed futures funds. This approach seeks to capture the diversified performance of a broad range of hedge fund strategies, such as long/short equity, global macro, and fixed income arbitrage. By investing primarily in derivative instruments, the fund aims to deliver long-term capital appreciation while managing risk through diversification and leverage limits.

The managed futures sleeve aims to mimic the returns of a third-party index composed of 20 equally weighted, large managed futures funds. This sleeve invests in derivative instruments designed to reflect the return profile of this index. By doing so, the fund seeks to benefit from the potential diversification and trend-following strategies employed by these managed futures funds, which have historically performed well in extreme market conditions.

The fund's leverage limit of 300% of its net asset value allows for higher potential risk and reward compared to traditional mutual funds. This strategic approach enables active rebalancing, capitalizing on market inefficiencies. However, potential investors should remain cautious due to the inherent risks associated with derivatives and the fund's leveraged approach.

SEI Canada has recently received recognition as the "Best Overall Fund Family Group Over Three Years" at the LSEG Lipper Fund Awards, underscoring the firm’s dedication to delivering consistent, risk-adjusted returns. The SEI Liquid Alternative Fund seeks to provide Canadian investors with innovative solutions for wealth management, enhancing the tools available for advisors and their clients to adapt to different market conditions.

In conclusion, the SEI Liquid Alternative Fund offers a unique investment opportunity for Canadian investors seeking to diversify their portfolios. By leveraging derivatives to mimic hedge fund returns while maintaining a 300% leverage limit, the fund presents a strategic approach to capital appreciation. However, investors should carefully consider the fund's risk profile and the potential benefits and drawbacks of its leverage strategy before making investment decisions.