LGIM AUM breaks £1trn mark but index business suffers outflows in 2018
Total net inflows of £42.6bn
Legal & General Investment Management (LGIM) has managed to grow its assets under management beyond the £1trn mark in 2018, but the index funds offering suffered £14.8bn of net external outflows over the period.
The group's attracted external net flows of £42.6bn last year, although these were slightly below last year's figure of £43.5bn. This helped total assets grow by 3% from £983bn to £1.015trn.
The largest proportion of net flows went into its solutions offerings, which took in £47.6bn over the year; global fixed income was also popular, attracting £9.6bn in external net flows.
However, it was let down by its index funds business, which suffered £14.8bn in external net outflows during the year. Combined with the detrimental effect of market movements, this area of the business saw its total AUM drop from £340.9bn to £310.2bn in 2018.
The group said these outflows reflected a "structural shift from our UK DB index business as our clients continued to de-risk and adapt their investment strategies". It also included the loss of a £6bn mandate from one local government pension scheme.
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Although index assets performed poorly, the acquisition of ETF platform Canvas, announced at the end of 2017, brought £2.4bn to AUM last year, although LGIM said the flows were affected by market sentiment as investors grew more cautious on equity ETFs last year.
The only other area which saw a drop in AUM was active equities, from £7.1bn to £5.1bn, as a result of market movements despite net inflows of £400m.
The retail business saw its AUM increase to £25.5bn from £24.2bn, having seen net inflows of £2.8bn in 2018 (slightly lower than the £3bn attracted the previous year). Demand was particularly strong for multi-asset and index products in the retail side. The 2018 Pridham reported ranked LGIM as second in both gross and net UK retail sales.
The group said it also continued to make progress in its personal investing business, although AUM here dropped from £5.5bn in 2017 to £5.1bn by the end of 2018; this includes £1.8bn from legacy relationships with banks and building societies.
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Meanwhile, operating profit rose 2% from £400m in 2017 to £407m last year, while total revenues increased from £805m to £840m.
LGIM has been "automating and simplifying our business through investment in data analytics, providing a digital experience for our customers, and optimisation of our investment platforms". It said this continued investment in the business was reflected in its cost income ratio of 52%.
Nigel Wilson, group chief executive of Legal & General, said: "Despite tough markets for asset management globally, LGIM remains structurally well positioned for growth as reflected in our strong flows performance in 2018. LGIM will continue to benefit from global trends in retirement saving and the structural shifts in demand in the asset management industry.
"This is driving an increase in customer appetite for our diverse range of products, broad investment capabilities and strong cost efficiency. These competitive advantages have been crucial to LGIM's success to date and underpin the division's continued growth in a difficult operating environment."
