Roy Borzellino tailors the multi-manager SEI Canadian Equity Class to reflect the goals of its conservative retail and institutional clientele.
"We have a long-term focus," says Borzellino, "but we're very sensitive to short-term gyrations in the market and managing those gyrations and creating a consistent return environment. That's why our pension-plan clients love us."
What's good for a big client ultimately is good for a smaller client, and a mutual fund is a perfect vehicle for that, adds Borzellino, a portfolio manager at SEI Investments Canada Co. in Toronto. Of the approximately $9 billion in assets managed for Canadian clients, Borzellino is responsible for about $2.5 billion.
In his role as the lead manager of the Canadian equity mandate, launched in 2000, Borzellino hires and monitors the eight sub-advisors. While not responsible for the stock-picking, he is well versed on the market environment and "intimate with all our positions."
As anxious as investors are, says Borzellino, now is probably the best time to be an equity investor. "This is where the opportunities are created, much like in the dark days of the fall of 2008." There's a very strong linkage between GDP growth and stock-price appreciation, and GDP is growing in most economies, he adds.
Roughly 55% of SEI's Canadian assets under management are held by institutional clients, with safety of capital a key objective. While the bottom line is risk management, the mandate is positioned for growth potential. "We want to be able to find opportunities before the market really recognizes them," Borzellino says.
Among the sub-advisors, five are large-cap managers and three specialize in small-caps. There's a wide range of investment disciplines represented, including relative-value manager Kim Shannon of Sionna Investment Managers Inc., the earnings-momentum-style Highstreet Asset Management Inc., and the earnings-growth shop Montrusco Bolton Investments Inc.
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Based on SEI's experience, blending the sub-advisors together in a single portfolio helps achieve the return objectives of beating the S&P/TSX Composite Index while diversifying away a lot of the volatility.
Characteristically, an individual stock weighting will not exceed more than 10% over the overall portfolio but there are no industry-sector constraints. "I've allowed all our sub-advisors to pursue their ideas very opportunistically," says Borzellino, "and this is where I think we have a huge departure from other funds."
When selecting the managers for the fund, SEI tries to be very quantitative-driven during the research process. However, they are not just looking at the latest performance figures. Much more important is the overall history of the particular investment firm and how it has fared in different time periods. As well, there is the qualitative assessment, so "there's the little bit of subjectivity" as well, Borzellino says.
The firm believes in asset-class purity. Consequently, in the Canadian equity mandate, investors can expect every holding to be Canadian-listed, including some stocks that are also listed elsewhere.
Borzellino has watched SEI Investments grow from zero assets when he joined the firm in 1995, when the company was purely a consulting business. He was part of a team that planned and created the new asset-management business that now represents 100% of what the firm does.
Borzellino is a graduate of the University of Toronto, having earned a bachelor of arts degree in economics in 1985, and then an MBA in 1987. After graduation, he worked at Rogers Communications Inc. for about a year and a half. He then moved to Toronto-Dominion Bank in corporate banking until leaving in 1994 to join SEI. He also received the CFA designation in 1994.
Looking ahead and positioning the Canadian equity mandate for opportunities, Borzellino says there's been a strong rotation into financial services, which represent almost 37% of the portfolio, over the last three to four months. Among the fund's top 10 holdings are four banks and the insurance giant Manulife Financial Corp. MFC.
"More and more in this environment, there's need for yield," says Borzellino, "and banks are just a terrific cash machine and are going to be an important part of where we stand in the next six months. The Canadian banks especially have very good dividend yields, very stable operations, and increasing return on assets and equity. Good cash-flow generation eventually will go back to the shareholder."
