SEI DBi Multi-Strategy Alternative ETF Stock Price, News & Analysis

SEI DBi Multi-Strategy Alternative ETF (NASDAQ: QALT) is an exchange-traded fund that seeks long-term capital appreciation by replicating the return profile, before fees and expenses, of a model portfolio of alternative strategies that primarily consists of hedge funds. According to SEI, the fund uses a quantitative, rules-based approach to dynamically allocate long and short positions across global equity, fixed income, and currency markets.

Fund objective and strategy

The SEI DBi Multi-Strategy Alternative ETF is designed to follow the same strategy as the SIMT Liquid Alternative Fund, which was reorganized into the ETF structure. The stated goal is to provide access to a model portfolio of alternative strategies that aims to reflect hedge fund-like return characteristics while using an ETF format. The fund’s investment process relies on quantitative models and a rules-based framework to determine exposures across different asset classes and to implement both long and short positions.

QALT’s approach focuses on alternative strategies that are typically associated with hedge funds, with the objective of achieving long-term capital appreciation. The fund’s documentation notes that diversification may not protect against market risk and that the complex strategies employed expose investors to several risks, including those related to derivatives, short sales, and active management.

Management and sub-adviser

The ETF is managed by SEI Investments Management Corporation (SIMC), which serves as adviser to the SEI Funds. SEI states that SEI Investments Distribution Co. (SIDCO) distributes the SEI Funds, and both SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company (SEI), which trades on NASDAQ under the symbol SEIC. The SEI DBi Multi-Strategy Alternative ETF is sub-advised by Dynamic Beta Investments (DBi), an asset manager that specializes in hedge fund replication strategies.

DBi is described as combining rigorous research with the goal of delivering hedge fund-like returns with improved liquidity and lower fees, using quantitative techniques. SEI notes that since 2015, DBi has sub-advised SEI’s suite of liquid alternative funds, including products in the U.S., Ireland, and Canada, and that SEI has been investing in alternatives since 2003. The launch of QALT follows this history of collaboration between SEI and DBi in liquid alternative strategies.

Investment approach and use of derivatives

The fund’s materials highlight that QALT invests in derivative instruments and employs short sales as part of its strategy. These practices introduce risks such as illiquidity and counterparty risk for derivatives, and potentially unlimited losses and higher expenses for short sales. The fund is actively managed, and its investment process is expected to be dependent on quantitative models, which may not perform as intended. The documentation also notes that exposure to certain investment factors may detract from performance in some market environments, potentially for extended periods.

Because QALT is an actively managed ETF that trades its holdings, it may incur increased transaction costs. Active trading may also generate short-term gains, which can have tax implications for taxable investors. The fund’s disclosures emphasize that there are risks involved with investing, including possible loss of principal, and that there is no guarantee the fund will achieve its investment objective.

Relationship to the SIMT Liquid Alternative Fund

The SEI DBi Multi-Strategy Alternative ETF was launched following the reorganization of the SIMT Liquid Alternative Fund into an ETF format. SEI states that the ETF will adopt the same strategy as the mutual fund, but in what it describes as a cost-efficient and accessible structure. SEI and DBi also reference a decade-long track record associated with the SEI Liquid Alternative Fund, which they describe as a UCITS-compliant multi-strategy hedge fund solution designed to strengthen the risk-return profile of SEI’s institutional and private client multi-asset portfolios.

While that track record pertains to the mutual fund and related UCITS structure rather than the ETF itself, it provides historical context for the investment approach that QALT aims to follow. SEI notes that the success of the strategic partnership with DBi has provided differentiated investment opportunities for advisors and their clients over this period.

Risk considerations

The fund’s disclosures highlight that QALT may be considered speculative and may not be appropriate for all investors. The complex strategies used by the fund are associated with several risks, including market risk, derivatives risk, short sale risk, model risk, and tax-related considerations from active trading. The fund’s materials emphasize that diversification may not protect against market risk and that the quantitative models on which the strategy depends may not perform as expected.

Prospective investors are directed to carefully consider the fund’s investment objectives, risk factors, charges, and expenses, and to review the full or summary prospectus before investing. The prospectus is identified as the primary source for detailed information about the fund’s strategy, risks, and costs.

Context within SEI’s alternatives platform

SEI describes itself as a global provider of financial technology, operations, and asset management services within the financial services industry, and notes that it has been investing in alternatives since 2003. The SEI DBi Multi-Strategy Alternative ETF is presented as part of SEI’s growing lineup of ETFs and as an extension of its existing liquid alternative funds. SEI and DBi characterize the ETF as a way to deliver access to hedge fund-like strategies through the ETF structure, reflecting demand from advisors and investors for differentiated sources of return.

According to SEI, the SEI Liquid Alternative Fund, which is related to the strategy underlying QALT, is UCITS-compliant and has been recognized by certain industry awards in Europe for performance over multi-year periods in alternative multi-strategy categories. These references are used by SEI and DBi to illustrate the history and experience behind the strategy that QALT seeks to implement in ETF form.