Issue link: https://info.seic.com/i/1523140
For Financial Intermediary Use Only. Not For Retail Distribution. A smarter approach to distributions. The way distributions are sourced can have a big impact on performance over time. With DFS, distributions are initially funded with the income generated by investments— primarily dividends, interest payments, and capital gains distributions. If the income is not enough to meet the target, a portion of principal will be sold to achieve that goal. When principal is sold, the first assets targeted are those with overweighted positions, effectively rebalancing the strategy in the process. This would include assets that have appreciated in price to the point where they now represent a larger-than-desired percentage of a portfolio. In this way, an investor avoids selling assets that are under stress and focuses instead on selling assets that have met or exceeded their price targets. For greater tax efficiency, assets with capital losses would also be targeted when principal is needed to fund distributions. Investments with embedded long-term capital gains would be sold only as a last resort, as would assets in underweighted parts of the portfolio. Distribution source order 1. Investment income Dividends, interest payments, and capital gains 2. Overweight positions This avoids selling assets that are under stress 3. Assets with capital loss For improved tax efficiency 4. Embedded capital gains and underweight positions Sold only as a last resort 8 For Financial Intermediary Use Only. Not For Retail Distribution.