SEI QiM U.S. Large Cap Momentum Active ETF

SEIM

Market cap $1.41B

SEI Enhanced U.S. Large Cap Momentum Factor ETF is rated a hold due to limited outperformance and higher risk versus its benchmark. SEIM's momentum strategy results in significant tech sector concentration and higher volatility, with over 50% invested in AI-related companies. Despite a competitive 0.15% expense ratio, SEIM suffers from low liquidity, wider bid/ask spreads, and a lower dividend yield than IWB.

SEIM offers a unique blend of momentum and growth, targeting stocks with strong price performance and rising earnings, but comes with elevated volatility. The fund's concentrated portfolio and high beta profile provide strong upside potential, yet also expose investors to greater downside risk and uncorrelated returns. SEIM trades at a premium valuation justified by higher earnings growth, though its profitability slightly lags the benchmark due to sector allocations.

SEIM follows a momentum investing strategy with a quantitative, rules-based approach, selecting stocks based on price trends, earnings growth, and analyst outlooks. While SEIM has outperformed the S&P 500 since its inception, it has underperformed compared to FDMO, which has a higher large-cap stock exposure. SEIM's higher proportion of mid-cap and small-cap stocks may result in greater downside risk compared to FDMO, especially in economic downturns.

The SEI Enhanced US Large Cap Momentum Factor ETF focuses on U.S. large-cap stocks with strong recent performance, leveraging the momentum factor. The SEIM ETF's strategy is rules-based, using SEI Investments Management Corporation's model to select stocks, with a significant allocation to tech, industrials, and healthcare sectors. The fund's active management allows quick adjustments to market shifts, but it carries risks like sharp reversals and higher trading costs due to its momentum focus.

The appeal of exchange-traded funds (ETFs) is clear: increase the diversification of your portfolio by targeting a large basket of equities with a single ticker to trade, and leave oversight of that basket to professional fund managers. It's no wonder that ETFs have ballooned in popularity, now comprising more than 10,000 funds managing over $11 trillion in assets.

The Invesco S&P 500 Momentum ETF (SPMO) has outperformed the SPDR S&P 500 ETF (SPY) since 2015, with $2.2b in AUM and 13bps in fees. The SEI Enhanced U.S. Large Cap Momentum Factor ETF (SEIM), launched in 2022, has $500m in AUM, 15bps in fees, and benchmarks against the S&P 500 TR Index. SEIM significantly underperforms both SPY and SPMO, leading to a Strong Sell rating for SEIM.