SUNDAY 2 5 NOVEMBER 2018

FAC E TO FAC E A L W E S T

Fund management

SEI chief Al West says innovate or dieUS group’s founder on how he moved from engineering into asset management

© THE FINANCIAL TIMES LIMITED 2018

Silver balloons still adorn the spiral staircase at SEI’s London office, left over from the party held

to celebrate the group’s 50th anniversary.

The walls are painted in shades of tangerine, orange being the favourite colour of Al West, SEI’s founder and chief executive. Pieces of modern art from the billionaire’s collection are dotted through the building.

The US group’s professional focus is less glamorous. It works behind the scenes to provide “industry plumbing”, including the supply of custodian and fund administration services to the asset management industry.

Speaking a day after the party, Mr West’s manner is also low key. “One foot in front of the other,” he says in a Floridian drawl, summarising the half-century he has spent in the investment industry. “It’s always been exciting.”

At the company party, he preferred to mingle with his staff than give a speech; like its leader, SEI has managed to fly under the radar.

Just over 60 per cent of the group’s $920bn in assets relates to services it provides

for other asset managers, such as account and fund administration or treasury, trustee and custodial facilities. SEI still manages $339bn, primarily for pension funds.

Mr West prefers to discuss technology rather than

investment theory. In London the group has set up shop in Finsbury Square, not far from the “Silicon Roundabout” tech hub in Old Street.

Its US headquarters is more idiosyncratic. It is based in Oaks, Pennsylvania, rather than New York or on the west coast, and this allows it to sprawl out. “I couldn’t afford to move,” says Mr West, referring to the lean months after he completed his MBA at Wharton business school just 25 miles from the SEI office.

The company’s development has tracked that of the computer revolution, with financial services groups switching chunky loan books and paper certificates for automated banking services and, increasingly, computer-led investment advice.

Mr West trained as an aerospace engineer in the 1960s and became fascinated by computers. “They were brand new,” he says. “I used a computer in a couple of classes. I taught myself to program.”

He decided his future lay in business rather than

JENNIFER THOMPSON

INTERVIEW

The SEI founder on how he

moved from engineering

into asset management

fm

SEI

Assets $339bn plus $579bn underadministration

Founded 1968

Employees 3,900

HeadquartersOaks, Pennsylvania

Listing Nasdaq-listed. Mr Westowns 12.6 per cent; majorshareholders include Loomis Saylesand BlackRock

engineering and embarked on an MBA. Then he noticed an opportunity to use computers to speed up banks’ loan assessments.

“At that time the only people with any money were banks,” he says. “Our business was teaching loan officers how to lend money.” SEI’s simulation included 50 scenarios for borrowing requests to be used to train bank staff to make loans.

Mr West’s subsequent steps were due more to pragmatism than design. When revenue from program sales tailed off, he moved into providing trust services for banks as well as automating back-office functions.

This remained SEI’s prime activity throughout the 1970s. In 1981 the group went public and began offering conventional asset management services, initially

via segregated accounts for existing clients, on whose behalf it invested in money market funds.

Today SEI operates more than 200 funds. About half the assets it manages are in equities, 40 per cent in fixed income and the rest in alternatives. In its most recent results the group reported net income of $128m in the three months to September, a 26 per cent year-on-year increase. In 2017 full-year income rose 21 per cent to $404m.

Away from directly managing assets, SEI provides services that help rival fund managers operate. These include cash management and trustee, custodial and fund administration services as well as supplying the technology to manage investment platforms.

Despite expanding into different areas, SEI pulled out of investment consulting 21 years ago when it sold its advisory service business.

The disposal was a shrewd move given the increased scrutiny on groups that provide both advisory and asset management services.

The UK’s Competition and Markets Authority found this year that a significant number of investors use their investment consultant’s own fiduciary management services. It highlighted a possible conflict of interest but stopped short of recommending a break-up of businesses where such conflicts may arise.

One of SEI’s most profitable products is the SEI Wealth Platform, which provides back, middle and front office services to wealth managers.

The group built it for HSBC’s private bank and it is now used by 46 clients, including UK companies Tilney and Brewin Dolphin.

Mr West regards the private wealth market as the group’s biggest opportunity in the next three to five years. “Robos were supposed to automate everything. They’re not doing it,” he says, pointing out that many investment advisers still rely on manual processes.

Despite half a century in the industry Mr West resists the temptation to predict what lies ahead. “There’s a lot of uncertainty,” he says of Brexit. SEI’s Ucits fund range is domiciled in Dublin, meaning the products can continue to be sold to investors across Europe following the UK’s departure from the EU next March.

In the more general sense, he says: “I don’t see any crisis coming at us. It’s not like 2008-09. That was a real crisis. We learnt, hopefully, from that.”

He is just as nonchalant about increasing competition in automated services. In July, State Street agreed to buy Charles River Development, a Massachusetts company, to try to expand its services.

Charles River specialises in automating front and middle office investment management requirements on a single platform. “We do a more holistic job than State Street does,” says Mr West. “We have to innovate continuously. If you don’t do that you’re pretty much dead.”

He is enthusiastic about the potential of artificial intelligence, data analytics and blockchain technology

to improve efficiency. He compares the latter technology, which makes it possible to carry out transactions between two parties without intermediaries, to the Depository Trust & Clearing Corporation, which provides clearing and settlement services.

“It’s making a lot of things easier to do,” he says. “It’ll be a productivity enhancer, big time.”

Now 75, Mr West gives no indication of wanting to step down. He says he has the board’s support to carry on. Of succession planning, he says: “We’re dealing with it.”

He owns 12.6 per cent of SEI and has invested part of his private fortune in the modern art in SEI’s offices, preferring to buy from unknown artists. His daughter curates the collection, which includes work by Toby Ziegler and Nina Katchadourian.

“What’s important is these are emerging artists,” he says. He believes new artists and art forms stimulate conversation and curiosity, helping the company become more creative. Employees are encouraged to discuss the pieces and have a veto so that those they dislike are not placed near their desks.

A fan of the open-plan office, Mr West hates hierarchical management. He insists that furniture at SEI has wheels so that layouts can be altered easily and colleagues can switch around.

“Change is a scary thing for most people. Don’t get settled,” he counsels.

Born Florida, December 1942

Pay $2.03m in 2017

Education1964 BSc in aerospaceengineering, Georgia Instituteof Technology1966MBA, Universityof Pennsylvania, Wharton School

Career1968-present founder, chairmanand chief executive of SEI

© THE FINANCIAL TIMES LIMITED 2018