Active fixed income trumps LGIM’s index business

IndicesLegal & General Investment Management (LGIM), one of the largest providers of traditional passive funds in the UK pensions market, saw a net outflow of £1.5 billion (€2 billion) in its index business for the three months ending March 31.

In a trading update, in which the company shows a positive net flow for its overall business, LGIM also says it had its first index fund win in the US during the period.

UK pension funds have been observed to prefer traditional passive funds compared to exchange-traded funds (ETFs) – a factor that has inhibited the otherwise meteoric recent rise of ETFs in Europe.

External gross inflows to LGIM’s index business came to £6.8 billion and the gross outflows reached £8.3 billion.

Total assets at LGIM increased by 17% to £736.8 billion. The company’s index business is the second largest portion of that with £284.6 billion, after the ‘Solutions’ business, which includes liability-driven investments and multi-asset funds.

The third-quarter report says: “LGIM has had notable successes in the US, winning our first Index mandate, and in Asia, winning further mandates across the region.”

Active fixed income was a stronger area than index funds, with a net external flow of £0.7 billion. However, LGIM’s ‘Solutions’ business was the largest section of business with a net flow of £4.9 billion.

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