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2022 Envestnet Asset Manager Awards

Multi-Asset Strategist Manager of 2022: SSI Investment Management

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The ability to capture trends through tactical positioning led to solid absolute and risk-adjusted performance last year for SSI Investment Management’s SSI Flexible Allocation Portfolios, an all-ETF portfolio that won Envestnet’s 2022 Asset Manager of the Year Award in the Multi-Asset Strategist category.

The boutique firm’s 12-member portfolio management team, working together for more than two decades, uses a combination of fundamental analysis and quantitative research to generate consistent performance as they pursue broad market upside and protection against downside risks, Envestnet analysts note.

All three SSI Flexible Allocation Portfolios — conservative, moderate and moderately aggressive — outperformed their Morningstar peer groups in 2021, with the conservative and moderate portfolios also significantly surpassing their benchmarks.

A focus on U.S. equities, an underweight to core fixed income, and diversification in high-yield securities and bank loans, contributed to last year’s success, Envestnet noted.

Portfolio manager Ken Raguse said the team combines risk management and flexible allocation strategy in a process that reduces risk based on the environment or increases risk to take advantage of opportunities, he added.

While their quantitative model is a big driver of their asset allocation, SSI’s fundamental analysis proves important as well, Raguse said. In 2021, the quantitative model remained positive toward equity markets and the fundamental portfolio management team maintained an equity allocation above the benchmark throughout the year, Raguse said.

With the equity market generating strong returns last year, “managing the fixed income portion of the portfolio was more challenging,” Raguse said, noting the S&P 500 produced a 28.7% return while the Bloomberg U.S. Aggregate Bond Index return was down 1.7%.

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“The fixed income portion of SSI’s Flexible Allocation Portfolios outperformed the benchmark and generated positive returns in 2021. SSI’s active approach on the fixed income side resulted in exposure to several differentiated asset classes and significantly less interest rate sensitivity — duration — than the Bloomberg Aggregate Bond Index,” he said.

SSI’s flagship moderate portfolio returned 17.17% last year, landing in the 11th percentile of its peer group, as represented by the Morningstar Allocation — 50% to 70% Equity category, which includes 569 portfolios, Raguse said. The moderate portfolio’s benchmark, 60% S&P 500 / 40% Bloomberg U.S. Aggregate Index, returned 15.86% in 2021, while the Morningstar peer category returned 13.06%, he noted.

This differentiated positioning on the fixed income side added to alpha, Raguse said. The team replaced portions of traditional fixed income, such as U.S. Treasuries and investment-grade bonds, with the First Trust Senior Loan ETF, which returned 3.9% in 2021, and the FPE, or First Trust Preferred Securities and Income ETF, a floating preferred investment, produced a 5.2% return last year, Raguse explained.

He described the team as constrained tactical managers: “And by that, I mean, we’re not trying to make calls on market bottoms or market tops. It’s a very disciplined process that adjusts systematically over time.

“So what we’re doing is looking at the quantitative output, taking that output as a team fundamental and evaluating it, and then adjusting the portfolio systematically over time. And as the environment changes, if there’s substantial changes in the environment, there will be big changes in the portfolio. But it’s a predictable, consistent process that can be repeated over time,” Raguse added.

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Ken Raguse

Title: Manager; Years with firm: 27; Years in financial services: 30; Investment/asset class: Multi Asset Strategist; Asset management firm: SSI Investment Management; Year firm founded: 1973; Number of employees: 30; AUM as of April 30, 2022: $2.3 billion