The Diversification Illusion
By Rob Eckrote, CFA, Head of Product Specialists
More holdings does not always mean more diversification
Investors can own thousands of U.S. stocks and still carry meaningful exposure to the same handful of mega-cap names. Equal weight can reduce that concentration, but it often replaces one blunt exposure with another.
SEHAX works to broaden exposure, diversify return drivers, and adjust weights as market conditions change — and this strategy recently became available in an ETF wrapper under the ticker SEUS.
SEHAX Morningstar overall rating1
Source: Morningstar U.S. Large Blend, universe includes 1,203 funds, rating is based on risk-adjusted returns and three-year period (7/31/23- 7/31/2026).
Total-market does not mean diversified
A third of your weight can sit in just 10 names—at an average market cap north of $300B*. Broader index, same mega-cap risk.
Source: Morningstar Direct data supplied by SEI, June 2026. Rounded. See important information for funds and indices referenced and term definitions.
*Russell 3000 average market capitalization as of 6/30/2026.
Equal weight isn’t the answer
It dilutes the mega-caps — but adds no intelligence. Equal-weight strategies are blunt, static, and rebalance mechanically back to the same fixed weights. Equal weight fixes the symptom, not the disease.
SEHAX dynamically allocates across value, quality and momentum, seeking to reduce dependence on the largest names while maintaining broad U.S. equity exposure. SEUS uses the same investment strategy as SEHAX and packages it in an ETF structure.
| 3 yrs ended 07/31/2026 | SEHAX | Russell 3000 |
| Return | 20.90% | 18.75% |
| Volatility | 12.4% | 13.2% |
| Sharpe ratio | 1.36 | 1.18 |
| Up/down capture | 101% / 88% | 101% / 102% |
SEHAX performance and risk statistics compared with the Russell 3000 Index, the fund performance benchmark. Russell 3000 up/down capture is the 100% baseline. See important information for term definitions.
SEHAX Performance as of 6/30/2026
| 1-Yr | 3-Yr | 5-Yr | Since Inception | |
| SEI Institutional Investments Trust U.S. Equity Factor Allocation Fund Class A (SEHAX) | 23.20% | 21.09% | 13.37% | 14.89% |
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1‐800‐DIAL‐SEI.
Not just multi-factor—adaptive by design
Here’s what sets SEHAX apart. Most multi-factor funds lock in static factor weights and never touch them. SEHAX starts from strategic weights, then tilts them using live valuation, trend, and macro signals as markets shift.
- Multi-factor engine. Expresses value, quality and momentum across the U.S. large-cap market — a diversified set of return drivers, not one bet.
- Adaptive, not static. Leans into factors being rewarded and trims those that aren’t, navigating rotations across cycles.
- Systematic, with human oversight. A disciplined, model-driven process where PMs validate key trades to avoid unintended bets.
One holding, the work of four
The goal is not simply to own more names. The goal is to own U.S. equities differently. SEHAX shows a similar level of shared-weight overlap with the broad U.S. equity market as an equal-weight index, while using a factor-aware process rather than a mechanical equal-weight rebalance.
Portfolio overlap — % of shared weight
| Shared-weight overlap | |
| SEHAX vs. Russell 3000 | 45% |
| S&P 500 Equal Weight vs. Russell 3000 | 42% |
SEHAX shows a similar level of shared-weight overlap with the broad U.S. equity market as an equal-weight index, while taking a different, factor-aware approach to portfolio construction. Weighted overlap (sum of minimum weights), as of June 2026. See important information for the fund referenced.
Why pair total market with equal weight—when SEHAX is designed to broaden exposure through one adaptive strategy?
SEHAX is the historical reference point for the strategy: an adaptive U.S. equity factor allocation approach with a live track record across market environments. SEUS brings that same investment strategy into an ETF wrapper. Together, the SEHAX track record helps illustrate the strategy’s long-term role, while SEUS offers investors a new ETF access point to that same adaptive approach.
Insights you can leverage.
Important information
SEUS is a newly launched ETF that follows the same investment strategy as the related fund, SEI U.S. Equity Factor Allocation Fund (SEHAX, inception 4/26/2018); performance, Morningstar ratings and rankings shown are for SEHAX and do not represent SEUS ETF performance. The related fund would have substantially similar performance as the ETF, differing only to the extent expenses differ. Both have the same investment adviser, team, and substantially similar investment strategy and process. SEUS net expense ratio 0.30% vs. 0.56% Morningstar U.S. large-blend peer average. Factor exposure, concentration and average market-capitalization data as of June 2026; risk statistics for the three years ended 6/30/2026.
1The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales load. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three- year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
2Fund and index names are listed as seen left to right. SEI Institutional Investments Trust U.S. Equity Factor Allocation Fund Class A (SEHAX). S&P Total Market Index (S&P US TMI). Morningstar US Total Market Index (CRSP US TMI). Russell 3000 Index (Russell 3000).
3The S&P Total Market Index (TMI) is designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks. The S&P 500® and the S&P Completion Index are subsets of the S&P TMI.
The Morningstar US Total Market Index is designed to measure the performance of the entire US equity market. The index targets 100% of the investable US equity universe, spanning mega-, large-, mid-, small-, and micro-cap stocks.
The Russell 3000 Index tracks the performance of the 3,000 largest U.S. companies representing approximately 98% of the investable U.S. equity market.
4The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight - or 0.2% of the index total at each quarterly rebalance.
The SEI US Equity Factor Allocation Fund was rated against the following numbers of U.S.-domiciled US Large Blend funds over the following time periods: 1,207 funds in the last three years and 1,126 funds in the last five years. With respect to these US Large Blend funds, the SEI US Equity Factor Allocation Fund received a Morningstar Rating of five stars for the last three and five-year periods. Past performance is no guarantee of future results.
©2026 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
There are risks involved with investing including loss of principal. There is no assurance that the objectives of any strategy or fund will be achieved or will be successful. No investment strategy, including diversification, can protect against market risk or loss. Current and future portfolio holdings are subject to risk as well. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. REIT investments are subject to changes in economic conditions, credit risk and interest rate fluctuations. Investments in smaller companies typically exhibit higher volatility. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities, which may affect the Fund's performance. The Fund uses a quantitative‐based, active stock selection investment strategy, which typically relies on a model‐based approach to make investment decisions. Due to the significant role technology plays in such strategies, they carry the risk of unintended or unrecognized issues or flaws in the design, coding, implementation or maintenance of the computer programs or technology used in the development and implementation of the quantitative strategy.
To determine if the Fund is an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund's full or summary prospectus, which can be obtained by calling 1‐800‐DIAL‐SEI. Read the prospectus carefully before investing.
SEI Investments Management Corporation (SIMC) is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCO). SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company.