Index fund management is at the heart of our business strategy. We are one of the largest providers of index funds in the UK. Having offered index funds for over 30 years, we are committed to delivering high-quality, cost-effective solutions for your clients.  

With the majority of our revenues coming from managing index funds, our commitment to index investing is unequivocal. As at 31 December 2020, we managed £430 billion of index assets. [1]

Each of these pillars supports one purpose: providing your clients with everything they are entitled to as asset owners, not just an index’s returns.

Pragmatic replication

At LGIM, we have developed our own philosophy on the management of index funds that we call ‘pragmatic replication’, an approach that is focused on delivering the best value for our investors. The overarching objective is to track the benchmark index as tightly as possible, using our in-house expertise, resources and technology to undertake comprehensive research aimed at enhancing investor returns when managing index changes.

Through such techniques, we believe we can reduce fund turnover and costs when trading and seek to maximise returns by exploiting any short-term mispricing or inefficiencies.

How do we embed responsibility and ESG in our index funds?

Clients trust us to manage, safeguard and grow the value of their assets. We take this responsibility seriously, and so we manage our index funds responsibly. As part of this commitment, we integrate rigorous ESG criteria into our index funds where our clients give us the mandate to do so. Fundamentally, we believe that companies that appropriately manage their ESG profile generally deliver better investment value over the long term.
 
We seek to meet these obligations in our index funds through the combination of three approaches:

 

01

Through company engagement as a major global investor, we can have meaningful dialogue with corporate boards and executives on matters that impact long-term financial returns, taking a truly long-term view and using our scale to influence decisions.

02

Through a broader corporate governance lens, we address emerging issues, collaborate with other stakeholders, regulators and policymakers, and escalate concerns.

03

Through ESG integration, we can use our proprietary scoring tool to deliver meaningful improvements in our index funds’ ESG profiles. Our ‘tilting’ approach allocates more capital to companies with higher ESG scores and less to companies with poor ESG scores, which we believe provides a compelling blend of impact, transparency, and market exposure.

Further information is available from our research paper on ESG integration in index strategies.

Introducing L&G ETF

The L&G ETF range initially includes 20 products listed on multiple European stock exchanges and licensed for distribution in 14 European countries.

We will capitalise on our strength in equity, fixed income and factor-based investing – as well as our Future World proposition – as we develop more products in the L&G ETF range.

Find out more

[1] LGIM internal data as at 31 December 2020. The AUM disclosed aggregates the assets managed by LGIM in the UK, LGIMA in the US, and LGIM Asia in Hong Kong. The AUM includes the value of securities and derivatives positions.

[2] Share Action, December 2020.