27 July 2017

Legal & General Investment Management launches multi-factor equity fund with Boots Pension Scheme

Legal & General Investment Management (LGIM) has expanded its factor-based investment offering with the launch of a multi-factor global equity fund, which has initial investment from Boots Pension Scheme.

Factor-based investing seeks to identify and harness underlying drivers of performance – or factors – in order to meet specific investment objectives. The LGIM Diversified Multi-Factor Equity Fund (‘the Fund’) invests in a diversified portfolio of global equities that exhibit ’factor’ characteristics1, while aiming to reduce risk relative to the global equity market by diversifying more effectively across regions and reducing stock-specific concentration. It is launched as a pooled vehicle for UK institutional clients.

Adam Willis, Head of Index & Multi-Asset Distribution at LGIM, said: "Investors are increasingly looking for alternatives to traditional market cap and multi-asset products. Factor-based investing is growing in popularity as it can be used to meet different investment objectives in a cost-efficient manner.

"We have delivered client-focused factor-based strategies for over ten years, working closely with our clients to create pioneering solutions such as the L&G Future World Fund launched last year. We are excited to continue to develop our offering into multi-factor solutions on behalf of schemes such as Boots."

LGIM has developed the Fund in partnership with Scientific Beta, the provider of factor-based indices established by EDHEC-Risk Institute. The Fund uses Scientific Beta’s recently launched High Factor Exposure Indices as building blocks for the portfolio. LGIM has customised the building blocks to target a balanced factor exposure while enhancing diversification and reducing risk by controlling region and currency exposures.

The Fund will be managed by Multi-Asset Fund Manager Andrzej Pioch alongside LGIM’s broader Asset Allocation team, which currently manages over £37bn.

Noël Amenc, CEO at Scientific Beta, said: "Our philosophy combines controlled risk exposure, diversification of specific risk and robustness at all stages of index design. LGIM’s Asset Allocation team and Scientific Beta share a view on the most efficient implementation of a strategic multi-factor fund; this, combined with our academic research into the merits of factors, make us an aligned and informed partner for LGIM."

LGIM manages £35bn in factor-based strategies and alternatively weighted indices2. In November last year, LGIM launched the L&G Future World Fund, a multi-factor global equities index fund that incorporates a climate ‘tilt’ to address the investment risks associated with climate change. The fund was selected as HSBC Bank UK Pension Scheme’s equity default option within its defined contribution scheme.

Ends

 1 Factors incorporated within the Fund include:

- Value: compares the price of a stock with its fundamental value as measured by its book value of equity

- Low volatility: selects companies that have exhibited less risk in the past, with more stable stock market prices over time

- Quality: tilts towards companies that are highly profitable and/or invest conservatively

- Size: provides more exposure to those companies outside of the very largest by market capitalisation

2 LGIM internal data as at 31 December 2016. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data includes derivative positions and advisory assets.

Legal & General Investment Management:

Legal & General Investment Management is one of Europe’s largest asset managers and a major global investor, with total assets of £902 billion*. We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.

Throughout the past 40 years we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.

* LGIM internal data as at 31 December 2016. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data includes derivative positions and advisory assets.