SEIM: Momentum Exposure Is Not a Commodity
By Rob Eckrote, CFA, Head of Product Specialists
The punchlineSEIM did not avoid the momentum reversal. It experienced it differently.During the recent selloff, SEIM maintained meaningful momentum exposure but carried significantly less exposure to the market's highest-volatility stocks. That helped reduce the severity of the drawdown relative to the Peer Average. |
A recent reversal created very different outcomes
Momentum had been one of the strongest areas of the U.S. equity market, but the month ended July 29, 2026 was a sharp reminder that factor leadership can reverse quickly.
From June 29 through July 29, SEIM declined -7.82%, compared with -14.46% for the Peer Average and -1.62% for the S&P 500 Net Return Index.
The drawdown experience tells the same story. SEIM's maximum drawdown was 9.04%, versus 16.11% for the Peer Average and 3.40% for the S&P 500 Net Return Index.
Why advisors should care
The lesson is not that momentum stopped working. The lesson is that investors do not own abstract factors.
They own portfolios. Two funds can both be called momentum and still behave very differently when market leadership changes.
Same factor. Different portfolio. Different experience.SEIM seeks to capture momentum, but the portfolio is built with guardrails around risks that can come with momentum, including exposure to expensive, lower-quality or highly volatile stocks. |
Why did SEIM get hurt less?
QiM's updated analysis points to a clear driver: exposure to high-volatility stocks.
During momentum reversals, the most volatile stocks can sell off sharply as crowded positions unwind. Momentum strategies with more exposure to those stocks can therefore experience larger drawdowns.
As of July 29, 2026, 5.56% of SEIM was exposed to the highest-volatility decile, compared with 17.90% for the Peer Average. The peer-group range was 8.00% to 29.60%. Over the reversal period, high-volatility exposure detracted 2.98% from SEIM, compared with 8.39% for the Peer Average and 14.71% for the worst peer result.
Same factor, different portfolio
SEIM is managed by SEI's Quantitative Investment Management team, or QiM. The team does not implement momentum through a simple screen. It researches how momentum behaves, how market environments change and how a factor signal can be translated into a portfolio designed to balance conviction and risk.
That shows up in the factor profile. SEIM maintained positive active momentum exposure, but with more balanced value, quality and volatility characteristics than the Peer Average. Put more simply: SEIM remained a momentum strategy, but did not rely as heavily on some of the higher-risk traits that can accompany crowded momentum trades.
How to explain this to clients
SEIM seeks momentum exposure, but not an uncontrolled momentum bet.The strategy is designed to capture companies with strong momentum while managing risks that often build beneath the surface of momentum trades. During the recent reversal, that portfolio construction mattered. |
Helpful questions when evaluating momentum strategies:
- How is momentum defined?
- How much exposure does the portfolio have to highly volatile stocks?
- What guardrails exist around valuation, quality, concentration and crowding?
Longer-term context
The recent one-month reversal is only an illustration, not a promise of future results.
Longer-term results provide context. For the monthly period from July 31, 2023 through June 30, 2026, SEIM generated a 29.70% annualized return, compared with 32.77% for the Peer Average and 19.47% for the S&P 500 Net Return Index.
SEIM also delivered that return with lower annualized volatility than the Peer Average and a higher Sharpe ratio. That matters because the objective is not simply to own momentum. The objective is to own momentum in a portfolio that seeks to balance return potential and risk.
| Metric | SEIM | Peer Average | S&P 500 Net Return |
| Annualized return | 29.70% | 32.77% | 19.47% |
| Annualized volatility | 16.31% | 19.72% | 13.01% |
| Sharpe ratio | 1.52 | 1.45 | 1.12 |
| Maximum drawdown | -10.55% | -10.97% | -8.36% |
Bottom line
Momentum reversals do not only test a strategy's exposure to momentum. They test the portfolio construction decisions that sit beneath that exposure.
This perspective is consistent with recent research from SEI's Quantitative Investment Management team, which explores how investment factors should be incorporated into portfolio construction decisions and why factor exposures are most powerful when viewed within the context of a broader portfolio framework. For readers interested in a deeper discussion, see QiM's recent article, CapEx-Induced Selloff? We Are Not Surprised.
SEIM's recent experience was not the result of avoiding momentum. It was the result of how momentum was translated into a portfolio. For advisors, that is the central point: momentum exposure is not a commodity.
Explore more on factor investing
Important information
Financial term and index definitions.
SEI Investments Management Corporation (SIMC) is the adviser to the Fund, which is distributed by SEI Investments Distribution Co (SIDCO). SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company (SEI). Quantitative Investment Management (QiM) is a team within SIMC.
To determine if this Fund is an appropriate investment for you, carefully consider the fund’s investment objective, risks, and charges and expenses. This and other information can be found in the fund’s prospectus, and if available, the summary prospectus, which can be obtained by calling 1-800-DIAL-SEI. Please read the prospectus carefully prior to investing.
Investing involves risk, including possible loss of principal. Diversification may not protect against market risk. There is no guarantee the Fund will achieve its investment objective.
There can be no assurance that performance will be enhanced or risk will be reduced for investment strategies that seek to provide exposure to certain quantitative factors. Exposure to such investment factors may detract from performance in certain market environments, in some cases for extended periods. In such circumstances, an investment strategy may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses.
While the investment strategies are actively managed, the strategies’ investment process is expected to be heavily dependent on quantitative models, and the models may not perform as intended. The Funds may trade securities actively, which could increase transaction costs (thereby lowering performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.
Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assume any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI.
Peer Average is not an index or an exhaustive representation of all momentum strategies. Constituent funds may differ by objective, investment universe, methodology, concentration, expenses and rebalance schedule.
The factor-exposure Peer Average consists of Invesco S&P 500 Momentum ETF, iShares MSCI USA Momentum Factor ETF, JPMorgan U.S. Momentum Factor ETF, ProShares Nasdaq-100 Dorsey Wright Momentum ETF and Invesco Dorsey Wright Momentum ETF. Fidelity Momentum Factor ETF and State Street SPDR S&P 1500 Momentum Tilt ETF were excluded because QiM identified both as having active share below 50%.
The high-volatility exposure-impact Peer Average also includes Motley Fool Momentum Factor ETF, as specified by QiM. The peer definition therefore differs between the factor-exposure exhibit and the high-volatility exhibit.
Past performance does not guarantee future results. Investment return and principal value will fluctuate.
Momentum investing is subject to the risk that securities maintaining positive trends may abruptly reverse. Factor strategies may underperform the broader market or other investment styles for extended periods.
Index returns do not reflect management fees, transaction costs or expenses. Indexes are unmanaged and investors cannot invest directly in an index.