Our five strategic imperatives* are applied across all business units. The following illustrates them in action in the Investment management division.
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Imperative |
Activity |
|---|---|
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Financial Management |
LGIM’s scalable business model displays high profitability, strong cash flow and high return on capital. |
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Diversified Business |
Expanding on UK’s largest index tracking business to pursue opportunities in active fixed income and equities, risk management solutions and expansion of US operations. |
|
High Quality Product, Broad Distribution |
Wide range of investment products spanning the full risk spectrum. More than 75% of LGIM’s FUM derived from outside of Legal & General Group, from more than 3,000 institutional clients. |
|
A Positive Customer Experience |
Scale and quality of execution are key to client value for money and adviser recommendations. Consistently rated highly by customer satisfaction surveys. |
|
High Expectation Culture |
LGIM has a low cost fund management model with a strong team based culture – positive legacies of a historic emphasis on index fund management. |
* As outlined at Strategy of the Group.
During 2008, LGIM built further on the successful growth which it has enjoyed over the last two decades. Today, it is one of the UK’s largest index tracking investors, attracting new and repeat business as a result of its efficient operating model and an ability to deliver a straightforward, well-priced, scalable product which has minimal capacity to disappoint.
While enjoying the largest share of the UK index tracking market, LGIM has recognised for several years that there is a benefit to diversifying its offering. Since the 1980s LGIM has pursued opportunities in the active fixed income and equity sectors. However, with the decision to widen the strategy in scalable products in 2006 it has grown its actively managed funds significantly. Active funds now account for 25% of total Funds Under Management (FUM).
Diversification has also extended internationally. In 2006, LGIM established a North American office in Chicago. As a major investor in fixed income securities, this improved the company’s access to the US bond markets. The US presence was expanded in 2008, as selective new hires added to LGIM’s expertise in North American markets.
A clear distinction is made between active and index investment approaches. The index business provides investors with a market return at low cost, while LGIM’s active funds offer a robust, research driven investment approach for a competitive price.
A high proportion (2008: 81.1%) of LGIM’s business is a result of existing customers choosing to invest further. Providing a positive customer experience is important to the business model, and the fee structures adopted by LGIM reflect this. Competitive fee structures are one aspect of LGIM’s success in attracting and retaining business – however they are rarely the decisive factor in winning mandates. Good execution – for example, the ability to shadow any of a range of indices accurately while keeping trading costs to a minimum and efficiency in processing settlements – and a commitment to customer service are important factors in providing the positive customer experience which ensures good customer retention and repeat business.
LGIM brings important synergy benefits to the Group. The basis of much of Legal & General’s Savings product suite is founded on the wide range of unitised investments made available by LGIM. This means individual investors have access to the same fund management expertise as the UK’s largest institutions. Pension buyout transactions involve a particular combination of expertise in mortality risk pricing and investment management, and as such, this is an area where there is close collaboration between LGIM and the Group’s annuity business.
LGIM has a strong performance culture, which benefits from a successful combination of high technical expertise and strong team collaboration. Together with LGIM’s size and scale, this gives the company’s investment managers a competitive advantage in regards to market access and trading technology platforms, in turn allowing them to offer clients innovative investment and risk management solutions.