Executive Summary / Key Takeaways

• SEI Investments is executing a strategic evolution, shifting from a vertical focus to an enterprise-first mindset, leveraging its integrated financial technology, operations, and asset management capabilities to become a strategic partner for clients seeking scale and efficiency.
• Recent financial performance demonstrates accelerating momentum, with Q1 2025 EPS increasing 18% year-over-year to $1.17 and consolidated operating margin reaching a three-year high of 28.5%, driven by strong sales events, operational leverage, and disciplined cost control across all segments.
• The company's differentiated technology, including the SEI Wealth Platform and investments in AI and new platforms like SEI Access, provides a competitive moat by enhancing operational efficiency and enabling access to new markets and product types like private assets.
• Targeted growth initiatives in segments like Investment Managers (particularly alternatives and global), Private Banks (regional/community banks, UK), and Investment Advisors (RIA space, UMH) are yielding results, supported by strong sales pipelines and cross-selling opportunities.
• While facing structural headwinds in areas like defined benefit plans and active-to-passive shifts, and navigating increased regulatory scrutiny and specific litigation risks, SEI's strong balance sheet and focus on strategic investments position it for sustained long-term growth.

Setting the Scene: A Strategic Evolution in Financial Services

Founded in 1968, SEI Investments Company has evolved into a global provider of financial technology, operations, and asset management services. Operating across distinct segments—Investment Managers, Private Banks, Investment Advisors, Institutional Investors, and Investments in New Businesses—SEI offers integrated solutions spanning the front, middle, and back office for a diverse client base, including asset managers, wealth managers, banks, and institutional investors. The company's historical journey has shaped its current position, emphasizing proprietary technology and comprehensive service offerings.

In recent years, SEI has embarked on a strategic evolution, moving towards an "enterprise-first mindset." This involves leveraging the full breadth of its capabilities across segments to serve clients more holistically, aiming to become a strategic partner rather than just a single platform provider. This shift is occurring within an industry landscape characterized by increasing demand for outsourcing, ongoing consolidation among financial firms, the convergence of public and private markets, and a complex and intensifying regulatory environment.

SEI operates in a competitive arena alongside formidable players. In asset management, it competes with giants like BlackRock (BLK) and Invesco (IVZ). In asset servicing and technology, rivals include State Street (STT) and other specialized fintech providers. While SEI's estimated 2-5% aggregate market share is smaller than leaders like BLK (15-20%), its strategy focuses on excelling in specific niches and offering integrated solutions that competitors often provide separately. Compared to BLK's scale advantage, which can translate to lower operating costs per unit, SEIC aims to differentiate through customization and service integration. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, SEIC's strong performance in targeted segments suggests effective penetration.

Technological Foundation and Innovation

At the core of SEI's offering is its differentiated technology, particularly the SEI Wealth Platform (SWP). This proprietary platform provides comprehensive technology and outsourcing services for wealth managers, supporting everything from client relationship management to back-office processing. As of March 31, 2025, the net book value of SWP was $201.9 million, reflecting ongoing investment. The platform's integrated nature offers tangible benefits, streamlining operations and improving efficiency for clients.

SEI is actively investing in enhancing its technological capabilities and developing new solutions. Capitalized software development costs were $7.4 million in Q1 2025, including $4.4 million for SWP enhancements and $3.0 million for a new platform for the Investment Managers segment, expected to be placed in service in the second half of 2025. The company is also exploring the application of AI across its operations, targeting internal efficiencies, client service improvements, and operational automation, including progressing AI business cases through its partnership with TIFIN.

New platforms like SEI Access, launched in March 2025, are designed to provide wealth managers and financial advisors with enhanced access to private markets, offering an end-to-end investment experience. This initiative, alongside the expansion of direct indexing SMA options and unified managed account solutions, demonstrates SEI's commitment to evolving its offerings to meet changing investor needs and capitalize on market trends like the retailization of alternatives. These technological advancements are crucial to SEI's competitive moat, enabling it to offer more efficient, integrated, and differentiated services compared to competitors relying on legacy systems or less comprehensive platforms.

Performance Reflecting Strategic Momentum

SEI's recent financial results provide evidence that its strategic evolution and targeted investments are gaining traction. Q1 2025 saw strong performance, with revenue increasing 8% year-over-year to $551.3 million and operating income rising 25% to $157.1 million. This translated to diluted earnings per share of $1.17, an 18% increase compared to Q1 2024. The consolidated operating profit margin expanded to 28.5%, the highest level achieved in the last three years, reflecting positive operating leverage, contributions from specific programs, and continued cost control efforts.

This momentum builds on a strong finish to 2024. Q4 2024 EPS of $1.19 represented a 31% increase from Q4 2023, driven by a 15% increase in revenue and a 43% increase in operating income. Full-year 2024 EPS reached $4.41, growing 27% versus 2023. Management highlighted that these results were broad-based, with all business segments contributing to growth in operating profits and expanded margins in Q1 2025.

Segment-specific performance underscores the impact of targeted strategies. The Investment Managers segment saw revenue grow 11% year-over-year in Q1 2025 to $192.0 million, with segment profit increasing 19% to $74.8 million and margin expanding to 39%. This was driven by strong sales momentum, particularly in alternative and global managers, increased administration fees, and new client conversions. The Private Banks segment achieved 6% revenue growth to $137.7 million and a significant 34% increase in segment profit to $23.0 million, expanding its margin to 17%. This growth stemmed from new SWP client conversions, growth from existing clients, and increased professional services revenue, partially offset by recontracting impacts.

The Investment Advisors segment also posted solid results, with revenue up 11% to $136.6 million and segment profit up 15% to $64.1 million, resulting in a 47% margin. This was significantly boosted by the SEI Integrated Cash Program, which contributed $20.8 million in Q1 2025, more than double the $9.6 million in Q1 2024. Growth in SMA and Strategist programs also contributed, offsetting declines in traditional mutual funds. The Institutional Investors segment experienced a 5% revenue decrease to $68.5 million in Q1 2025, primarily due to fee reductions and client losses, but managed a 3% profit increase to $32.6 million, expanding its margin to 48% through expense management and new OCIO client wins. The Investments in New Businesses segment saw revenue increase 15% to $16.5 million, while reducing its operating loss from $4.1 million to $2.0 million, driven by growth in SEI Sphere and SEI Private Wealth Management.

Asset balances also reflected positive trends despite market volatility. Total combined assets under management, administration, and advisement reached $1.61 trillion as of March 31, 2025, up from $1.46 trillion a year prior. Average assets under administration increased 13% year-over-year in Q1 2025 to $1.1 trillion, while average assets under management in equity and fixed income programs (excluding LSV) grew 4% to $182.5 billion. These increases were influenced by market appreciation, positive net inflows in certain areas (RIA, Institutional wins, Strategists, SMAs), and cross-selling, partially offset by outflows in SEI fund programs and institutional client losses.

SEI maintains a strong liquidity position and a disciplined approach to capital allocation. As of March 31, 2025, the company had $711.0 million in cash and cash equivalents and no long-term debt. Its $325 million credit facility, expected to be renewed in 2025, provides additional flexibility, with $320.1 million available as of April 10, 2025. Net cash provided by operating activities increased to $146.5 million in the first three months of 2025, up from $112.3 million in the same period of 2024, primarily due to higher net income. The company remains committed to returning capital to shareholders, repurchasing 2.5 million shares for $192.8 million in Q1 2025. The Board recently increased the stock repurchase authorization by $500 million, with approximately $476.8 million remaining as of March 31, 2025.

Outlook and Strategic Initiatives

Management expressed confidence in SEI's strong foundation and ability to deliver sustained long-term growth, anticipating that the momentum seen in late 2024 and early 2025 will continue. The outlook is supported by robust sales pipelines and the ongoing industry trend towards outsourcing technology and operational platforms. While acknowledging market uncertainty, the focus remains on controllable factors: talent, client focus, and strategic investments.

Key strategic initiatives are expected to drive future growth. The enterprise-first mindset is central, aiming to deepen client relationships and leverage the full suite of SEI's capabilities. Targeted investments in high-growth areas continue, including expanding the global footprint of the Investment Managers business (e.g., Luxembourg depositary services) and focusing on regional and community banks in Private Banking. Efforts to enhance the advisor ecosystem, particularly in the RIA space, are yielding results and positioning SEI to move upmarket.

The divestiture of the Family Office Services business, expected to close in Q2 2025 for $120 million, is viewed as an opportunity for that business to grow outside SEI while providing a strong return. This allows SEI to further focus resources on core strategic priorities. Investments in technology, including the new IM platform and AI applications, are expected to enhance efficiency and competitive positioning. Management anticipates investment costs will increase gradually throughout 2025 but expects their impact on overall margins to be limited, reflecting confidence in continued operating leverage.

Risks and Challenges

Despite positive momentum, SEI faces several risks and challenges. The complex and evolving regulatory environment poses a significant risk, with increased scrutiny, compliance costs, and the potential for sanctions. Specific matters, such as the UK FCA supervisory review of SIEL and the legal proceedings related to the Rubicon Wealth Management client relationship (alleging claims related to $15 million in transferred assets), highlight the potential for financial and reputational impact, although SEI intends to vigorously defend itself.

Market volatility remains a factor, potentially impacting asset levels and fee revenues, although SEI's diversification across product types and geographies helps mitigate this. Structural headwinds persist in the Institutional segment, particularly the defined benefit space, where elevated interest rates encourage plan annuitization, which is expected to continue through 2025. The shift from active to passive management also presents challenges, impacting LSV's earnings and traditional mutual fund flows, although SEI is adapting by offering broader product choices and focusing on platform assets. Competition across all segments is intense, requiring continuous investment and strategic execution to maintain market position and capture share.

Conclusion

SEI Investments is undergoing a deliberate strategic transformation, pivoting towards an enterprise-first approach to capitalize on the growing demand for integrated financial technology, operations, and asset management services. The recent acceleration in financial performance, marked by strong revenue growth, expanding margins, and robust sales events across key segments, suggests this strategy is beginning to yield tangible results. SEI's differentiated technology, ongoing investments in innovation like AI, and targeted initiatives in high-growth areas such as alternative investments and the RIA market are central to its competitive positioning.

While facing inherent industry risks, including regulatory challenges and structural shifts in asset management, SEI's strong balance sheet and disciplined capital allocation provide a solid foundation. The company's ability to continue executing its strategic plan, successfully integrating new capabilities, and effectively managing costs while investing for the future will be key to sustaining momentum and unlocking further value for shareholders in a dynamic financial services landscape.