[LGIM] continued to attract strong new business in 2009. Whilst maintaining its position as one of the largest providers of UK index tracking funds, LGIM has continued to diversify its offering to ensure continued growth and profitability. Active management capability and risk management solutions have been expanded, and new business inflows coming from non-index fund clients accounted for 24% of total inflows in 2009 (2008: 14%). Higher fee generating active products were successfully developed to complement strong growth in passive business. New business inflows into LGIM’s active fixed income funds amounted to £2.7bn in 2009, more than double the amount received in 2008 (£1.1bn).
Consolidation amongst competitors, including Black Rock’s acquisition of Barclays Global Investors (BGI), has increased the element of global competition in this market. LGIM continues to expand its global reach in the US, Europe and the Middle East and is well positioned to respond to this challenge as a powerful active and passive investment manager. Legal & General Investment Management America (LGIMA) took on its first external mandate in the United States in 2009 and is now in a position to market active fixed income and liability driven investment (LDI) funds to US institutional investors. LGIM also won its first European investment grade corporate bond mandate and received a significant passive mandate from the Gulf during the year. The ambition is to diversify in both products and markets and further opportunities will be explored in other international locations.
OPERATIONAL CASH GENERATION
£121m
(2008: £115m)
Against a backdrop of reduced asset prices, Investment management delivered a very strong performance in the generation of gross new business. 80% of new investments were made by existing clients (2008: 74%). It is encouraging that LGIM has significantly increased inflows into active fixed income and LDI mandates, with 95% and 61% respective growth year on year. These asset classes typically generate higher fee income than traditional index mandates.
LGIM has achieved record assets under management of £315bn as at 31 December 2009 (2008: £264bn) as a result of strong new business flows and recovering markets. In 2009, LGIM attracted £31.5bn in new fund inflows (2008: £30.9bn). LGIM is strongly cash generative and in 2009 [IFRS] operating profit was stable at £172m (2008: £172m) despite the impact of market volatility in early 2009.
LGIM is highly rated by its many institutional clients and their investment advisers for providing quality investment and client services. This has been recognised with a number of industry awards in 2009. Legal & General UK Property Trust was awarded Best Property Fund at the Money Observer Fund Awards. At the Financial News awards LGIM was awarded Client Service Team of the Year and Best Client Administration. Hedge Funds Review: awarded the LGIM Global Macro Fund the Best Newcomer award and Professional Pensions named LGIM Fixed Interest Manager of the Year and Pooled Manager of the Year.
IFRS OPERATING PROFIT
£167m
(2008: £165m)
2009 was a ‘year of two halves’ for the UK commercial property market as the trend of declining capital values in 2008 gave way to a strong recovery in the second half of the year. Legal & General Property (LGP) successfully stayed ahead of the market correction when values were falling, and positioned the business for re-entry into the market early in the second quarter.
Timely acquisitions during the year enabled Legal & General Property’s Funds to secure assets at historically low pricing. Between April and December, LGP successfully invested in over £600 million of assets on behalf of their open-ended funds and ended the year with gross FUM of £8.3bn (2008: £8.6bn).
During 2009 LGP’s investment performance track record has been strong, showing outperformance relative to benchmark in the majority of funds. This has already been acknowledged in several awards received during the year.
our performance
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2009 |
2008 | ||
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Total funds under management (FUM) |
£315bn |
£264bn | ||
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Gross new funds* |
£33.3bn |
£33.1bn | ||
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Fee-to-fund ratio |
10.3bps |
10.6bps | ||
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Operating profit* |
£167m |
£165m | ||
