SEI's Tax-Managed Large Cap Fund to use overlay manager, reduce taxes

By Toni Weeks

San Diego, Nov. 29 - SEI said it has introduced a new tax management structure for its Tax-Managed Large Cap Fund, according to a company press release.

Although SEI will continue to oversee the subadvisers managing the purchases and sales of securities for the fund, the subadvisers will now submit a model portfolio to an overlay manager, who will be responsible for aggregating the model portfolios in order to decrease the fund's overall tax exposure and provide greater after-tax returns for investors. The overlay manager will be Parametric Portfolio Associates.

SEI said in the release that it has used an overlay manager for its separately managed accounts since 2000, but this will be the first time an investment company has implemented this type of tax-management structure in a mutual fund with multiple managers.

The new approach will enable tax-sensitive investing throughout the year rather than viewing it as an end-of-the-year item, the release said. A recent SEI Quick Poll showed that more than ¾ of financial advisers view proactive managing for taxes as a key consideration for clients when making investment decisions. In addition, nearly one in three advisers felt they could preserve another 6% of their clients' wealth annually by managing for taxes.

"Given the uncertainty around taxes, investors are increasingly focused on overall investment returns on an after-tax basis," Kevin Crowe, head of Product Development for the SEI Advisor Network, said in the release. "This approach truly takes tax-efficient investing to the next level within a mutual fund structure."

The new overlay structure allows the overlay manager to supervise the impact of the taxes for the entire fund. Previously, only a portion of the fund could be managed by the subadviser for tax purposes.

The overlay manager will seek to reduce the impact of taxes by, among other methods, selling stocks with the highest tax cost first, opportunistically harvesting losses and deferring recognition of taxable gains.

The investment company is based in Oaks, Pa.

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