LGIM pits absolute return fund against Invesco and Aviva rivals

L&G Multi-Asset Target Return launches income share class to target retirees


Legal & General Investment Management is targeting UK pensioners with the launch of a sterling income share class for its £500m absolute return fund in a move that pits it against rival products at Aviva Investors and Invesco.

In a press release on Tuesday, LGIM billed the share class as ideal for retirees “who are seeking a regular cashflow from their investment, while maintaining capital growth”. It will aim to offer investors a “smooth income profile over the longer term” by paying out the fund’s natural income to investors on a quarterly basis.

The fund, L&G Multi-Asset Target Return, targets a cash +5% return per annum over rolling three year periods.

Managed by LGIM’s multi-asset team of Emiel van den Heiligenberg, Willem Klijnstra, John Roe and Chris Teschmacher, it follows an unconstrained approach and invests in active equity and fixed income. It also takes advantage of LGIM’s scale in low-cost index strategies to deliver “significant savings” for investors, the fund group said.

AJ Bell head of active portfolios Ryan Hughes said LGIM’s decision to launch an income strategy puts the fund up against the global multi-strategy income funds from Invesco and Aviva. “While income share classes are not necessarily that common on absolute return strategies, it highlights the level of yield that many different assets are now delivering,” he said.

L&G beats old incumbents

Hughes said the fund’s significant outperformance could also have been a motivating factor behind launching an income share class.

Since the fund was launched in March 2015 it has returned 18.72% versus the IA Targeted Absolute Return’s 3.88%.

It was the fifth best performer on a one-year view with returns of 6.66%, putting it just behind the popular Natixis H20 MultiReturns (6.69%) but well ahead of absolute return behemoths Standard Life Investments Global Absolute Return Strategies (-0.22%) and Invesco Global Targeted Returns (-1.79%), as well as the sector average (-0.98%).

3m 6m 1yr 3yr
L&G Multi-Asset Target Return 6.7 5.8 6.7 22.6
IA Targeted Absolute Return 1.2 0.6 -1.0 4.3
Source: Trustnet

But it was 24 out of 120 funds in the sector during 2018, which was a gruelling period for global markets generally.

“Overall, the fund has got off to a strong start in its first four years, outperforming its benchmark at a time when high profile competitors from Standard Aberdeen and Invesco have struggled,” said Hughes. “The key now will be to see how the fund performs in any kind of prolonged sell off as this is the time when absolute returns strategies such as this can really make or break their reputation.”

Growing demand

LGIM said it had decided to launch a new share class for the £535m absolute return fund in response to “growing client demand”. However, it and other multi-asset giants have been previously accused of relying on multiple share classes to appear cheaper on paper.

“With continuing market volatility our wealth and intermediated clients have increasingly demanded cost-effective low beta strategies,” said LGIM head of UK retail sales James Crossley (pictured). “Generating a consistent income can be really important for investors, especially those preparing for or already in retirement. This fund does exactly that and we expect it to be a core holding for clients with higher return targets.”

L&G Multi-Asset Target Return is available in six share classes, according to FE Analytics.

Institutional investors and holders of C class units, a share class designed for individuals with significant scale that actively distribute LGIM’s funds, can invest in the income share class.