INVESTMENT MANAGEMENT. OVERVIEW.

Mark Zinkula, Chief Executive Officer (LGIM) (photo)

“In 2011 we continued to expand our global footprint and range of products. Our focus in 2012 remains firmly on continuing to deliver the types of strategies and solutions that best meet our clients’ evolving needs.”

MARK ZINKULA
CHIEF EXECUTIVE OFFICER (LGIM)


HIGHLIGHTS

  • GROWTH IN LGIM PROFITS AGAINST A CHALLENGING MARKET BACKDROP.

  • SIGNIFICANT INCREASES IN REVENUE ACROSS [LDI], FIXED INCOME AND INDEX FUND BUSINESSES.

  • KEY STEPS TAKEN TO POSITION FOR GROWTH IN DEFINED CONTRIBUTION (DC) MARKET. INCREASED FOCUS ON CREATING SOLUTIONS TO SUPPORT THE LONG-TERM INVESTMENT NEEDS OF THIS CLIENT BASE.

  • INTERNATIONAL EXPANSION CONTINUES WITH AN INCREASINGLY GEOGRAPHICALLY DIVERSE CLIENT BASE AND SIGNIFICANT GROWTH IN NEW BUSINESS.

PERFORMANCE

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2011

2010

Total assets under management (AUM)

£371bn

£354bn

Gross new funds

£32.8bn

£32.6bn

Net new funds

£3.0bn

£6.6bn

OPERATING PROFIT

£234m

(2010: £206m)

  • Another strong year for LGIM with an increase of 14% in operating profit in a challenging market and an increase of 5% in assets under management to £371bn (2010: £354bn).

NET CASH GENERATION

£189m

(2010: £162m)

  • 17% increase in net cash generation as LGIM continues to grow its global footprint and expand the range of products and solutions available to clients.

IFRS PROFITS BEFORE TAX

£227m

(2010: £198m)

  • 15% increase in profits before tax, highlighting LGIM’s continued focus on the provision of investment products which continue to meet clients’ evolving needs.

INDEX

£224bn

ASSETS UNDER MANAGEMENT (AUM)

(2010: £229bn)

  • The initiative to extend the index franchise into selected international markets built up momentum during 2011; we now have a presence in a number of Middle Eastern and European markets. Firm plans were also drawn up for expansion into the North American and Asian markets; whilst the execution of the plan for North America started in the latter part of 2011, the implementation of the plan for Asia is on the agenda for 2012.

  • The index business has maintained strong performance seeing new business inflows of £22bn. This includes DC index inflows of £3.5bn, an increase of 39%, resulting in total DC assets of £21.3bn (2010: £19.2bn).

LDI SOLUTIONS AND ACTIVE FUNDS

£147bn

ASSETS UNDER MANAGEMENT (AUM)

(2010: £125bn)

  • The de-risking of defined benefit pension schemes continues at a great pace in both the UK and US. Our UK and US LDI mandate AUM total £58.4bn (2010: £40.8bn), has delivered a 36% growth in revenue year-on-year. One highlight was the work done with the annuity team to provide an innovative joint de-risking solution for the Turner & Newall Pension Scheme culminating in successful completion of the bulk annuity scheme.

  • 2011 was a challenging year for bond markets and LGIM has been able to continue to deliver strong performance for its clients. Active Fixed interest assets under management have increased 9% in the year to £72.4bn (2010: £66.6bn).

INTERNATIONAL ASSETS UNDER MANAGEMENT

£18.3bn1

(2010: £14.1bn)

1 Included in Index and LDI Solutions and Active funds.

  • LGIM’s geographic diversification continues with an increasing number of new international clients. We continue to see new mandates won in the US, Middle East and Europe. International AUM increased by 30% to £18.3bn (FY 2010: £14.1bn), with gross new business of £6.5bn. LGIM America has strong fund performance and continues to be recommended by an increasing number of pension consultants in the US.

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