LGIM clients include pension funds, institutional investors, corporates, charities and life companies
Legal & General Investment Management (LGIM) delivered record [IFRS operating profit] of £206m in 2010, an increase of 20% over 2009 (2009: £172m). New business volumes of £33.1bn in 2010 were up 5% on the same period last year (2009: £31.5bn). [Funds under management] at the end of the year were £354bn, a 12% increase from £315bn at the end of 2009.
The increase in funds under management is across all asset classes and can be attributed to the recovery of markets and strong new business flows.
As the largest manager of UK sourced pension assets, we continue to strengthen our services for Defined Contribution (DC) corporate pension funds. In 2010 we introduced mid-day priced funds aimed at the DC platform market. We will further bolster this offering with the introduction of a multi-manager and blending capability.
A key theme in the index fund market has been the provision of passive fund management across alternatively weighted funds. This has extended our range of index tracking products.
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INTERNATIONALISATION
LGIM’s international distribution strategy has led to a 177% increase in gross inflows from overseas clients of £6.1bn (2009: £2.2bn).
2010 saw the successful launch of the first in a series of new pooled funds structured as an Open Ended Investment Company (OEIC) which meets the requirements of European Institutional investors. This builds on our evolving euro credit capabilities with mandates won this year in Scandinavia, Germany and Holland.
We are growing our ability to service international markets such as the Middle East and continue to expand in the US with mandate wins in [Liability Driven Investment] and Active Fixed Income.
INDEX FUNDS
Index fund management remains a core part of LGIM’s business. As at the end of December 2010, total passive assets under management were £229bn (2009: £208bn) and gross new business amounted to £23.7bn in 2010 (2009: £23.9bn). Our flagship funds continued to consistently track their indices, producing returns with a healthy, positive bias versus their benchmarks while remaining within their target tracking tolerances. The size and stability of the client base within our market leading index tracking business has resulted in high persistency and good quality earnings.
LIABILITY DRIVEN INVESTMENT (LDI)
The de-risking of defined benefit pension schemes continues across our client base in the UK and increasingly in the US. LGIM and L&G are uniquely positioned as the provider that can help clients with all their risk management needs from defined benefit de-risking including moving to insured solutions to replacing with a flexible defined contribution or workplace savings arrangement. By the end of 2010, LDI funds assets under management for our UK pension clients had grown to £40.8bn from £29.9bn at the end of 2009 (growth of 36%).
The pipeline for [LDI] business remains strong from the largest clients who require a full integrated asset liability management service to the smallest clients who require flexible pooled solutions. LGIM remains dedicated to providing a leading service to all our clients.
ACTIVE FUNDS
Active funds under management grew by 9% during 2010 to £84bn (2009: £77bn) and now account for 24% of total [funds under management].
LGIM’s Active Fixed Income funds have continued to perform consistently well and that has allowed us to continue to attract new investment, with good inflows in particular to our European credit capability.
LGIM also continued to expand its range of active equity funds during 2010, launching UCITS III Directive compliant absolute return UK and European funds.
PROPERTY
2010 property returns reflected a robust, overall rebound in prime property capital values. Over the course of 2010, however, the UK commercial property market experienced a tightening in the availability of bank debt, a reduced supply of prime assets and a slowdown in the flow of retail and institutional equity into UK real estate funds.
Against this challenging backdrop, Legal & General Property (LGP) attracted over £1bn of new investment into its existing funds platform including the successful execution of capital raises for two of our specialist closed-ended property funds, the Leisure Fund and the Industrial Property Investment Fund, as well as new products designed to enable investors to access real estate in innovative ways.
CORPORATE GOVERNANCE
LGIM complies with the seven principles of the new UK Stewardship Code for investors which were published in 2010. We have also signed up to the UNPRI as detailed in the case study in the United Nations Principles for Responsible Investment section.
