Writing in the group’s results for the 2014 year L&G said: “it has been estimated that something of the order of $10trn worth of liabilities will be de-risked over the next couple of decades” and it believes LGIM is well placed to benefit as its share of the liability driven investment market is currently around 40%.
Total LDI assets increased by 26% in 2014 to £293.3bn, the firm said, including net flows of £21.1bn. Such growth is expected to continue and, in part to offset outflows from its UK passive funds, which will likely lose out in the shift.
“Our research indicates that almost two thirds of large defined benefit pension schemes are looking to de-risk,” the group added.
For the full year, LGIM said operating rose 11% to £336m, helped by a cost-to-income ratio of 48%.
Total revenues increased 9% to £645m, it said, as total assets rose from £611.6bn to 708.5bn at the end of 2014.
“This was driven,” L&G said, “by strong demand in LDI, multi asset, active fixed income and property asset classes, coupled with positive market returns.
However, the group recorded a sharp drop in net asset flows, down from £20.3bn in 2013 to £7.6bn in 2014, which was led by redemptions from its DB passive funds.
“International net inflows of £8.5bn (2013: £15.8bn) were primarily driven by demand from clients in the US, which resulted in net flows of $9.7bn (2013: $8.4bn) during the year,” it said.
The group’s property division saw AUM jump20% during the period to £13.6bn.
“LGIM’s property team plays an integral role in the Group’s drive to increase Direct Investments on behalf of L&G Retirement and L&G Capital. As one of the most active UK investors in the real estate market, LGP completed over £4.1bn of property transactions in the UK market in 2014, investing approximately £3.4bn and disposing of circa £0.7bn.”
