Legal & General Investment Management weathered Covid uncertainty last year, reporting a 7% jump in its assets under management from £1.2trn in 2019 to £1.3trn in 2020.
Legal & General’s investment arm saw external net flows of £20.4bn driven by structural demand for the company’s products “against a prior year comparator which included a £37bn mandate with the Japan Government Pension Investment Fund,” according to the company results.
Operating profits rose by 3% to £404m “reflecting increased revenues from flows and asset values, which were partially offset by LGIM’s continued investment in its growth strategy”. The company highlighted key areas of investment over the last year as data analytics, digital customer experience, investment platform optimisation and international expansion, including the scaling up of their European operations.
The company results said: “We expect to maintain a cost income ratio in the high 50% range over the next two to three years as we invest for growth, after which we expect it to trend downwards.”
LGIM index funds rack up £6.8bn in net outflows
Flows into its investment arm were overwhelmingly driven by its Solutions business which took in £24bn over the period, while LGIM’s multi-asset and active funds brought in an additional £2.8bn and £2.5bn respectively.
However against the backdrop of the pandemic LGIM’s index strategies struggled. In total £6.8bn was pulled from its index funds in 2020, making it the only business segment to end the reporting period with net outflows.
LGIM said this was due to a structural trend of DB schemes de-risking, which resulted in money shifting from index to liability-driven investment (LDI) Solutions strategies.
Net outflows into its index business were gently offset by £1.5bn pouring into its ETF business as the fund group launched a range of ESG aligned ETFs, including a new thematic Clean Energy ETF and a Core Fixed Income ETF range with ESG considerations.
See also: LGIM assets jump 9% on strong pensions inflows
International business hit by outflows
Flows into its retail business totalled £1.6bn, which boosted retail AUM to £41.6bn in 2020, up from £38.8bn in 2019.
LGIM also saw positive net flows of £10.2bn into its Defined Benefit business as pension plans sought to hedge their risk. LGIM launched the Secure Income Assets Fund last year to add to its defined benefit products.
It has also seen an additional boost of 14% in customers using its Workplace pension platform in 2020, with members reaching four million.
But its international business saw negative flows of £4bn thanks to US pension plans rebalancing their portfolios away from fixed income in the low rate environment.
Commenting on the Legal & General group-wide results Nigel Wilson, group chief executive, said: “Legal & General delivered a robust and resilient performance for all stakeholders, providing stability to our people, customers and shareholders. Our balance sheet remains strong, with the Solvency II coverage ratio currently over 190% and trading remains consistent with delivering our growth ambitions which are supported by six long term growth drivers. Our commitment to inclusive capitalism, ESG and investing in climate change means we intend to play an important role in the post pandemic recovery.”
