In this Q&A, Legal and General Investment Management’s (LGIM) Francis Chua, Fund Manager, and Aimee Bowkett, Assistant Fund Manager, talk to IFA Magazine about how their Model Portfolio Service (MPS) is really causing a stir in the market: offering a cost-effective solution without compromising on LGIM’s high level of service
IFA Magazine: When it comes to MPS, how important is cost?
FC: Cost is very important. Cost is the only certainty that you can have in investing and, of course, fees detract from an investor’s returns. If an investment has a high cost, then the required return needs to be higher. If we take a step back and think about why we invest, not just in a model portfolio service but in general, we invest to grow our assets. We’d ideally do this over the long term and reap the potential benefits of compounding returns. Through this lens, we can easily see that high costs can be a potential challenge in achieving that long-term goal of investing.
According to our research, the average UK MPS investor pays roughly 1% per annum for model portfolios[1] – and this is before platform charges and adviser fees are taken into account. We believe this is too expensive and so ensured cost-effectiveness was at the front of our minds when we built our MPS range. We wanted to disrupt the market and help clients access a more affordable solution to achieve their outcomes without compromising on the high level of service or quality that we continue to deliver. We have a fixed portfolio management fee of just six basis points (bps) and our underlying model portfolio OCFs range from 21 bps – 45 bps. If you add these two charges together, it is lower than what the average investor typically pays. That is a very compelling proposition to bring to the market, in our view.
IFA Magazine: How is LGIM disrupting the market in MPS without compromising value?
AB: When we launched our Multi-Index funds in 2013, we were seen to be disrupting the market. I think there are similar parallels that can be made today with our MPS range. It is competitively priced – without compromising on the level of service – due to the size and scale of LGIM’s business. This allows us to find efficiencies in cost that we can pass on to the investor.
Our MPS solution benefits from the expertise of our Asset Allocation team, the same expertise that is the backbone of all our multi-asset portfolios. The team comprises over 35 investment professionals with an average of 14 years of experience across a breadth of different fields, including investment management, banking, and academia. To get the most out of a team of this size it is important that we all adhere to a collaborative, team-driven approach.
Today we manage more than £72 billion in multi-asset funds, from a variety of clients, across pension schemes, insurance, retail, etc.[2] We feel this is a testament to the strength of the team and our robust processes. We are, of course, extremely delighted and grateful to have won awards for this.[3]
IFA Magazine: How can advisers benefit from a multi-award-winning team?
FC: We’ve touched on the importance of cost and experience of our team earlier; lets focus now on LGIM, which has a long history of putting clients first with a heritage dating back to 1836!
When an investor invests with us, the investor doesn’t just get access to the Asset Allocation team. They get access to all of LGIM.
For instance, our model portfolios brings together our multi-asset capabilities with our leading index expertise with over £430 billion of assets under management.[4] In addition, we have also joined forces with LGIM’s Solutions team which oversees more than £200 billion worth of institutional portfolios.[5] Therefore, we have brought together the expertise of these teams and are able to offer something that is truly differentiated, dynamic, and – we believe – extremely exciting for advisers and their clients.
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Important Information: For professional clients only. Past performance is not a guide to the future. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. Views expressed are of LGIM as at 13/09/22. The Information in this document (a) is for information purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strategy; and (c) is not investment, legal, regulatory or tax advice. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272.
[1] As at 30 June 2022
[2] Source: LGIM, as at 30 June 2022
[3] To view the list of awards won by the multi-asset team, please visit: https://www.lgim.com/uk/ad/capabilities/multi-asset/multi-index-funds/#awards
[4] Source: LGIM, as at 30 June 2022
[5] Source: LGIM, as at 30 June 2022
