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Investment Performance Review
Second Quarter 2001
July 11, 2001
SEI Advisor Network
Today’s Agenda
•
Market and SEI Performance Overview for 2nd Qtr
•
Recent Enhancements to SEI’s Implementation
Strategy
•
Presentation of Advisor Tool Kit
•
Questions & Answers
For Intermediary Use Only. Not For Public Distribution
Market and Performance Overview
First Quarter 2001
For Intermediary Use Only. Not For Public Distribution
Mixed Signals From the US Economy
Some Indicators
are Recessionary. . .
. . .While Others are
Far From Trouble
NAPM Purchasing Managers' Index, (Index, SA)
80
Unemployment Rate Since 1970 (%)
Unemployment Rate (%)
11
70
60
50
40
30
10
9
8
7
6
5
4
3
20
70
73
76
79
82
85
88
91
94
97
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00
00
Consumer Spending
Announced Layoffs
10%
% Change (y-o-y)
Layoffs (Ths.)
2,000
1,500
1,000
500
8%
6%
4%
2%
0%
-2%
-4%
0
1989
1991
1993
1995
1997
1999
2001*
* Projected
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00
For Intermediary Use Only. Not For Public Distribution
Reasons to Believe
It’s tempting at times like these to expect the worst,
BUT
 The economic news remains mixed, which
suggests areas of weakness and strength
 Tax cuts and Fed rate cuts do work with a lag on
consumer and business spending
 Stock prices have rebounded, boosting consumer
confidence
For Intermediary Use Only. Not For Public Distribution
Talking Points
 Disciplined Investing Yields Results
 2nd Quarter Offered Further Confirmation that
SEI’s Investment Process Works
 Tracking Errors Have Reverted to the Norm
For Intermediary Use Only. Not For Public Distribution
The Rocky Road to Recovery
Year-to-Date Returns as of 6/30/01 for
the Dow, the Nasdaq and the Wilshire 5000
130%
120%
110%
100%
90%
80%
70%
Jan-01
Feb-01
Mar-01
Dow
Note: All indexes set to 100
on January 2, 2001
Apr-01
Nasdaq
May-01
Wilshire 5000
For Intermediary Use Only. Not For Public Distribution
Jun-01
2nd Quarter Fund Performance
Q2 Net Returns (%)
Return
Alpha*
+ 23.17%
+ 5.05%
Emerging Market Equity
+ 5.71%
+ 1.81%
Emerging Market Debt
+ 4.41%
+ 0.98%
International Equity
- 0.71%
+ 0.61%
Tax-Managed Large Cap
+ 6.88%
+ 0.57%
High Yield
- 0.61%
+ 0.30%
Large Cap Value
+ 5.15%
+ 0.27%
Core Fixed Income
+ 0.45%
- 0.11%
Large Cap Growth
+ 8.31%
- 0.11%
+ 11.13%
- 0.57%
- 2.67%
- 0.69%
Small Cap Growth
Small Cap Value
International Fixed Income
* Return Relative to Benchmark
For Intermediary Use Only. Not For Public Distribution
SEI Portfolio Performance: Rolling Returns
2001 Q2
TAX-MANAGED
1 Year
2 Year
3 Year
5 Year
Active Tax-Managed (ATM) 60
Index Blended Benchmark
3.74
3.29
-9.20
-8.25
-1.48
0.13
3.17
3.90
Active Tax-Managed (ATM) 100
5.76
4.97
-18.39
-16.99
-6.24
-3.76
1.82
2.85
Institutional Growth & Income (60 / 40)
Index Blended Benchmark
3.65
3.36
-8.83
-9.00
0.93
0.46
3.57
3.66
7.75
7.58
Institutional Equity (100)
Index Blended Benchmark
5.65
5.14
-18.89
-18.93
-3.05
-3.58
1.72
1.91
8.53
8.28
DOMESTIC
Domestic Equity (100)
Index Blended Benchmark
7.69
7.39
-15.36
-16.42
-4.42
-4.50
2.63
2.63
12.90
12.29
GLOBAL
Global Equity (100)
Index Blended Benchmark
5.95
5.58
-17.59
-18.07
-4.52
-4.70
2.13
1.83
11.02
10.39
Index Blended Benchmark
INSTITUTIONAL
Note: Index Blended Benchmarks are gross returns, while SEI specific portfolios are net returns. Outperformance in BOLD.
For Intermediary Use Only. Not For Public Distribution
SEI Portfolio Performance: Annual Returns
2001 YTD
2000
1999
Active Tax-Managed (ATM) 60
Index Blended Benchmark
-3.38
-3.00
-6.65
-4.64
17.26
16.41
Active Tax-Managed (ATM) 100
-7.17
-6.62
-14.45
-11.16
28.11
26.12
Institutional Growth & Income (60 / 40)
Index Blended Benchmark
-4.20
-3.65
-4.40
-4.97
Institutional Equity (100)
Index Blended Benchmark
-8.75
-7.80
DOMESTIC
Domestic Equity (100)
Index Blended Benchmark
GLOBAL
Global Equity (100)
Index Blended Benchmark
TAX-MANAGED
Index Blended Benchmark
1998
1997
17.36
15.74
11.88
13.34
14.05
13.38
-12.43
-12.64
28.68
25.60
14.11
16.32
20.85
19.52
-7.95
-6.36
-7.48
-9.82
20.47
19.95
20.51
21.52
33.19
30.91
-9.29
-8.13
-9.58
-10.80
24.21
21.40
20.37
21.24
25.57
24.70
INSTITUTIONAL
Note: Index Blended Benchmarks are gross returns, while SEI specific portfolios are net returns. Outperformance in BOLD.
For Intermediary Use Only. Not For Public Distribution
Analysis of Large Cap Growth Performance
Year-to-Date 2001 as of 6/30/01
Attribution
(%)
•
SEI managers correctly judged industry
performance. For example, overexposure
to energy and underexposure to technology
boosted first-half performance.
•
Stock holdings within the technology sector
were at the root of the first quarter’s
underperformance. In the tumultuous
markets at the start of the year, investors
sought shelter in some well-known
technology names that our investment
managers did not hold because the
companies did not satisfy the managers’
investment criteria.
•
Notable deviations from the benchmark
were IBM, Microsoft, Nokia and Solectron.
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
Stock Selection
Industry Weight
Stock Selection Attribution, by Sector
(%)
2.0%
0.0%
-2.0%
-4.0%
C
yc
lic
al
s
St
ap
le
s
En
er
g
Fi
na y
nc
H
ea ials
lth
Ca
r
In
du e
s
Te tria
ls
ch
no
lo
g
M
at y
er
ia
Te l s
le
co
m
U
tili
tie
s
-6.0%
Q2
YTD
1 Year
3 Year
5 Year
SEI Large Growth
8.31% -18.59% -37.30%
0.23% 13.31%
R1000 Growth
8.42% -14.24% -36.17%
0.69% 11.98%
Net contribution
-0.11%
For Intermediary Use Only. Not For Public Distribution
-4.35%
-1.13%
-0.46%
1.33%
Analysis of Small Cap Growth Performance
Year-to-Date 2001 as of 6/30/01
Q1 Stock Selection by Sector
0.0%
(%)
•
Fund performance remains extraordinarily
strong.
•
Quarter-to-quarter fluctuations occasionally
happen because our managers select
stocks based on their long-term fundamentals, not short-term technical factors.
•
An example of this occurred this year.
-2.0%
C
yc
lic
al
s
St
ap
le
s
En
er
g
Fi
na y
nc
H
ea ials
lth
Ca
r
In
du e
s
Te tria
ls
ch
no
lo
g
M
at y
er
ia
Te l s
le
co
m
U
tili
tie
s
-4.0%
Q2 Stock Selection by Sector
•
The Fund fell short of the benchmark
in the first quarter due largely to
underperformance in three sectors.
•
The Fund handily outperformed the
benchmark in the second quarter
thanks to gains in those same three
sectors.
(%)
4.0%
2.0%
0.0%
er
g
Fi
na y
nc
H
ea ials
lth
Ca
r
In
du e
s
Te tria
ls
ch
no
lo
gy
M
at
er
ia
Te l s
le
co
m
U
tili
tie
s
En
le
s
St
ap
C
yc
lic
al
s
-2.0%
For Intermediary Use Only. Not For Public Distribution
Q2
SEI Small Growth
23.17%
R2000 Growth
18.12%
Net contribution
5.05%
YTD
1 Year
3 Year
5 Year
-0.74% -21.67% 14.04% 11.55%
0.16% -23.25%
-0.90%
2.19%
4.79%
1.58% 11.85%
6.76%
US Tax-Managed Large Cap Fund
Recent Enhancements Paying Off
•
Changes were made to our tax-managed
structure in an effort to maintain the tax
sensitively of the Tax-Managed Large Cap
Fund while delivering the opportunity for
greater returns.
•
These changes are supporting positive
results for the Fund:
• Posted a +7% absolute return for the
quarter
• Outperformed its benchmark during the
second quarter
• Core-Tax Manager Parametric has
capitalized on loss harvesting
opportunities to enhance after-tax
performance
Parametric
Core Tax-Managed
Sanford
Bernstein
Deep
Value
Equinox
Peregrine
Alliance
Provident
Relative
Value
Long-term
Growth
Core
Growth
Hyper
Growth
Fund Performance
YTD
SEI TMLC**
6.88%
-7.15% -16.33%
2.03%
4.43%
R1000
6.31%
-7.05% -14.96%
4.24%
6.13%
0.57%
-0.10%
-2.21%
-1.70%
Net contribution
1 Year
-1.37%
3 Year
Incept#
Q2
** Pre-tax returns for
SEI Tax-Managed Large Cap Fund
# Returns from Fund inception in March 1998
For Intermediary Use Only. Not For Public Distribution
US Large Cap Value Fund
Building on Positive Performance
Deutsche
Value
•
Fund gained over 5% during the second quarter
•
Led the benchmark once again in Q2
• The Fund has now led its benchmark in four
consecutive quarters to generate near 5%
outperformance over the last year

Each of our specialist value managers
outperformed during the quarter
•
LSV:
+ 7% return in Q2
•
Bernstein:
+ 7% return in Q2
•
Iridian:
+ 5% return in Q2
Iridian
Sanford
Bernstein
Deep Value
LSV
Relative
Value
Contrarian
Value
The recent addition of Deutsche as the new core
manager in the Fund has already paid off:
• Manager posted a 5% return
during the quarter to exceed
3 Year 5 Year
the benchmark.

Fund Performance
Q2
YTD
SEI Large Value
5.15%
0.45% 15.02%
3.92% 13.65%
R1000 Value
4.88%
-1.27% 10.33%
5.35% 14.94%
Net contribution
0.27%
1.72%
1 Year
4.69%
-1.43%
-1.29%
Emerging Market Equity Fund
Emerging Equity Fund Rallied in Q2
Nicholas Applegate
•
Global Growth
Schroder
Global Core
Emerging markets continue to outperform US and
International markets this year, and SEI’s Fund is
outperforming its benchmark by a sizeable margin.
•
The Boston Company
Global Value
Morgan
Stanley Schroder
Latin
EMEA
America
•
Recent structural enhancements to Fund paying off
•
Dedication to value stocks through Boston
Company has been beneficial, as value
continues to outperform growth in these regions
•
Exposure to EMEA regions such as Israel,
Russia and South Africa has also boosted
returns
SGY
Asia
Fund Performance
Q2
YTD
SEI EM Equity
5.71%
MSCI EMF
3.90%
Net contribution
1.81%
1 Year
Stock selection in China, India, Korea and
South Africa helped drive performance
3 Year
5 Year
-1.02% -28.58%
-2.87%
-8.12%
-1.78% -25.92%
1.59%
-6.01%
-4.46%
-2.11%
0.76%
-2.66%
For Intermediary Use Only. Not For Public Distribution
Review of Recent Portfolio
Enhancements
For Intermediary Use Only. Not For Public Distribution
High Yield Bond Fund
Old Structure
New Structure
Nomura
Nomura
Concentrator
Concentrator
Nicholas Applegate
Core
Credit Suisse
Core
Shenkman
Fundamental Value
•
The Fund has posted consistent long-term positive returns that are ahead of its benchmark
•
SEI is adding Shenkman to target the Fundamental Value segment of the High Yield market. This
should improve the risk and reward profiles for the Fund.
•
Process and research capacity
concerns necessitated the
replacement of Credit Suisse
•
Nicholas Applegate will take
the reins as the Fund’s new
Core manager
Q2
YTD
1 Year
3 Year
5 Year
SEI High Yield
-0.61%
4.38%
-1.11%
-1.02%
4.72%
CSFB HY, DCO
-0.91%
4.12%
-0.76%
-1.18%
4.19%
0.30%
0.26%
-0.35%
0.16%
0.53%
Net contribution
For Intermediary Use Only. Not For Public Distribution
Talking Points
 Disciplined Investing Yields Results
 2nd Quarter Offered Further Confirmation that
SEI’s Investment Process Works
 Tracking Errors Have Reverted to the Norm
For Intermediary Use Only. Not For Public Distribution