LGIM inflows fall by a third despite bond sales

Still on track to become first UK asset manager with £1trn AUM

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Legal & General Investment Management (LGIM) has reported external net inflows fell to £14.6bn in the first half of 2018, a drop from £21.7bn during the same period last year.

The group also said international flows were lower at £9.9bn, down from £17.9bn last year.

However, the group H1 2018 results showed global fixed income net external inflows of £6.5bn, up from £5.3bn during the same period last year.

Additionally, within the retail business, £1.4bn of net inflows were reported, a slight drop from £1.8bn in H1 2017. The group stated multi-asset, real asset and index products were particularly popular.

LGIM said this was driven by robust demand for credit strategies from US, while UK clients increased their fixed income allocations as they de-risked their portfolios.

Passive outflows expected to continue

The half year update also revealed that there were shifts in the index business with external outflows at £18.6bn, compared with £4.3bn the previous year.

The results said this was driven by “UK DB clients implementing de-risking strategies together with the expected loss of £6bn of assets from one local government pension scheme.”

“We expect to see continued index outflows from our DB clients as they transition into our LDI strategies. Outflows from the UK index business were partially offset by net inflows from US, Asian and retail clients,” it said.

LGIM AUM nears £1trn

Despite net external outflows, LGIM still reported a 4% rise in assets under management to £985bn, bringing it closer to becoming the first UK asset manager responsible for £1trn.

Retail AUM increased to £25.1bn, an increase from £21.4bn reported last year. The firm said it continued to develop its product range and client service proposition in the UK and its distribution strategy in Europe following the acquisition of ETF business Canvas.

The results said:We completed the acquisition of Canvas in March and the integration is on track. Total AUM at acquisition was £2.4bn and flows since then have been strong.”

Nigel Wilson, group chief executive, said LGIM’s momentum continues as it expands in the US and extends its global footprint in Asia.

Both operating profits and revenues were also up 5%, with the former to £203m from £194m in H1 2017 and the latter to £412m from £394m. Profit before tax also rose to £199m from £190m.

Fee revenues were up from £382m to £396m but the group said these were impacted by lower asset values in Q1, due to challenging market conditions.

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