Buyouts, Technology & Solid AUM Aid SEI Investments Amid Cost Woes

Core Viewpoint - SEI Investments (SEIC) is positioned for growth due to its global presence, solid assets under management (AUM), strategic acquisitions, and technological innovations, although it faces challenges from rising expenses and high reliance on fee-based revenues [1]. Tailwinds for SEIC - SEIC has shown impressive revenue growth with a compound annual growth rate (CAGR) of 5.2% over the five years ending in 2024, while total AUM, advisement, and administration experienced a CAGR of 8.2% during the same period [2]. - The company has been actively expanding through acquisitions, including LifeYield in December 2024 to enhance multi-account tax management, and other buyouts like Altigo and National Pensions Trust, which are expected to support top-line and AUM growth [3]. - Revenue and total assets are projected to grow at a CAGR of 5.6% and 3.5%, respectively, by 2027 [4]. - SEI Investments relies heavily on technology, with its primary business platform, Investment Processing, generating revenues through TRUST 3000 and the SEI Wealth Platform (SWP), which saw a CAGR of 5.5% over the five years ending in 2024 [5]. - Strategic acquisitions of technology platforms like Oranj, Finomial, and Novus are enhancing SEI's technological capabilities, with information processing and software servicing fees expected to grow at a CAGR of 6.6% by 2027 [6]. - As of December 31, 2024, SEIC's total debt was $51.2 million, significantly lower than cash and cash equivalents of$839.9 million, indicating strong liquidity to meet near-term obligations [7]. - The company has raised its semi-annual dividend by 6.5% in December 2024, following a 7% increase in December 2023, and has a share repurchase plan with approximately $169.6 million remaining for authorization [8]. - Over the past six months, SEIC shares have gained 19.3%, outperforming the industry’s 12.8% increase [9]. Headwinds for SEI Investments - Rising expenses are a concern, with total expenses having a CAGR of 5.8% over the last five years, primarily due to increased compensation and data processing costs [10]. - The company anticipates continued inflationary pressure on personnel costs, with total expenses projected to grow at a CAGR of 6.2% by 2027 [11]. - SEIC has significant reliance on fee-based revenues, which accounted for 78.9% of total revenues in 2024 and 2023, and is expected to contribute 78.5% in 2025, making it vulnerable to market fluctuations and regulatory changes [12].