Introducing Seeds’ New Factor SMA Series: Investment Solutions Designed for the Modern Economy & Modern Investor

At Seeds, we believe it’s our responsibility to empower financial advisors to deliver truly personalized investing experiences, and we prioritize listening to customer feedback to figure out what we should tackle next.

Part of that dedication to evolving our platform involves providing investment customization options to match differing investor needs and preferences. That’s why we’re proud to introduce a new core investing series to our platform: Seeds Factor SMA Series.

What is the Factor SMA Series?

Seeds’ Factor SMA Series is the third investing series on the Seeds platform, complementing our Values Series and Index Series. The series includes three core factor models, designed for investors with longer time horizons, higher risk tolerances, and an interest in innovative new approaches to investments:

U.S. Large Cap Factor, which seeks to outperform the S&P 500
U.S. Mid Cap Factor, which seeks to outperform the S&P 400
U.S. Small Cap Factor, which seeks to outperform the S&P 600

Rooted in a scientific approach, this series focuses on constructing broadly diversified, low turnover, tax-efficient strategies using prices, along with fundamentals, to identify stocks with higher expected returns.

Why Should I Consider Investing My Clients’ Assets in a Factor Model?

Simply put: our economy is shifting.

Forty years ago, the top companies by market cap primarily contained tangible, physical assets. Their retention of physical assets such as property, inventory, equipment, and machinery meant balance sheets reflected the hard assets as a measure of success.

Today, that is no longer the case.

What we deem valuable today often takes the form of intangible assets—like, software, patents, data, and brand equity. In fact, 90% of all assets in the S&P 500 in the year 2000 were intangible, as opposed to 17% of assets in 1975.¹

The tech boom and emergence of a primarily digital economy means that book values are no longer driven primarily by ownership of tangible assets, but intangible assets. However, traditional investing strategies typically rely on accounting methods that may not fully incorporate intangible asset valuation. Factor investing seeks to incorporate these elements.

Seeds has created modernized value and quality metrics—which we’ve named iValue and iQuality to indicate the accounting of intangible assets—to address biases found in traditional metrics. Our Seeds Factor SMA Series employs these metrics in our model design and implementation, along with momentum screens, to balance exposure to higher expected long-term returns, deviations from the benchmark, number of holdings, and costs.

How is the Factor SMA Series Different from Seeds’ Other Series?

Seeds Values Series empowers investors to invest in companies based on their management of Earth, People, and Corporate Integrity issues. Designed to provide advisors with values-based investing solutions for clients that wish to align their money with issues of importance to them, the Values Series considers over 20 material issues within the three broad EPI categories to align with a diverse range of investor beliefs.

Meanwhile, Seeds Index Series provides investors with access to widely-tracked, reputable benchmarks for each asset class. Designed around tax-efficient benchmarking with lower minimums, the Index Series includes strategies that deliver market-like performance and a tax-efficient experience in a low minimum format.

Our Factor SMA models seek to outperform their respective benchmarks over longer time periods while managing stock, sector, and country related risks. The strategy is based on compelling historical evidence, and uses a systematic, rules-based approach to improve the reliability of outperformance over longer periods of time.

Ultimately, we believe that every investor deserves a personalized portfolio that captures their unique preferences, needs, time horizons, risk tolerance, risk capacity, and goals. Expanding our SMA series to include factor-based models provides more customizable options for advisors who wish to employ these strategies for more risk-seeking investors.

Where Can I Learn More About the Factor SMA Series?

To learn more about implementing Seeds Factor SMA models in your client portfolios, schedule a demo with our team today.

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Sources:

1: Source: Visual Capitalist. The Soaring Value of Intangible Assets in the S&P 500, 2023.

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Seeds Investor LLC (“Seeds”) is a Registered Investment Advisor located in the State of New York, headquartered at 43 West 23rd Street, New York, NY 10010. Tel. 212−287−7370. Before entering into an advisory relationship with Seeds, you will receive a copy of its ADV Part 2 and Form CRS. Factor investing strategies involve risks, including periods of underperformance relative to traditional benchmarks. There is no guarantee that these models will achieve their intended results. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such. Individual investments, investment services, and/or strategies mentioned herein may not be suitable or appropriate for every investor or every situation. Seeds does not provide tax or legal advice. To the extent that this communication includes references to securities, those references do not constitute a recommendation to buy, sell or hold such security The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. iValue is defined as market price divided by Book Value minus Goodwill plus SGA , iQuality is defined as operating profitability divided by Book Value minus Goodwill plus SGA. Book value represents the net asset value of a company, calculated as total assets minus total liabilities. It reflects the value of a company's equity as recorded on its balance sheet and may differ from market value due to accounting principles, asset depreciation, and intangible asset valuation. Goodwill is an intangible asset that arises when a company acquires another entity for a price exceeding the fair value of its net identifiable assets. It represents the premium paid for factors such as brand reputation, customer relationships, and intellectual property. Goodwill is subject to periodic impairment testing, which may result in adjustments to a company’s financial statements. SG&A expenses include operating costs that are not directly tied to the production of goods or services. These expenses typically consist of marketing, salaries, rent, utilities, and other administrative costs necessary for the company's daily operations. SG&A expenses are reported on the income statement and may impact a company’s profitability. Backtested performance is hypothetical and does not reflect actual trading results. It is generated with the benefit of hindsight and is subject to inherent limitations. Backtesting may not fully account for real-world market conditions, including liquidity constraints, execution costs, and slippage. Additionally, models rely on historical data and assumptions that may not hold in future market environments. Past performance is not indicative of future results, and reliance on backtested data should be supplemented with careful due diligence and risk management.

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