LGIM looks to go on attack with 6bps MPS

The asset management giant has said it is now planning on pushing its MPS proposition much more heavily and is not ruling out cutting its fees even further.

Antony Teare, head of regional sales at LGIM, said the company had spent the preceding few years gaining access to as many platforms as possible and getting its portfolios rated by risk profilers such as Dynamic Planner.

The most recent NextWealth report showed a 3,467 per cent increase in LGIM's managed portfolio AUM, albeit from a low base.

Teare said: "We are working with over three times as many firms as this time last year, and have significant capacity. We do not have an upper limit of intermediary relationships in mind, but we are cognisant of the increase workload in expanding our relationships might bring.

"As such, we have plans in place to increase headcount in both sales, service and portfolio management to address increased demand as appropriate."

LGIM charges a 0.06 per cent DFM fee and its OCF for the balanced product totals 0.42 per cent and Teare said it was possible this could fall further.

He said: " Asset management and MPS is a highly competitive market, we believe that the focus on fees (as part of assessment of value) will continue to force downward pressure on pricing."

LGIM's fee is considerably below NextWealth’s sectoral average of 0.2 per cent, though its OCF for the balanced portfolio totals a considerably higher figure of 0.42 per cent when all’s said and done. 

We recently spoke to the team at Timeline, who keep an entirely in-house strategy with no active overlay. 

Timeline’s fees can also compete with LGIM, with a DFM fee at 9 basis points and a balanced portfolio’s OCF at 22 basis points. 

Asset Allocator had a chat with the portfolio team at LGIM to see exactly how this fund house distributes the capital within its portfolios.

Its balanced portfolio is exactly 40 per cent active, and multi-asset fund manager Francis Chua sees diversification as the key starting point. 

“The use of active strategies in our portfolios is driven by two factors: asset class and manager research. Our assessment of the asset class aims to take a broad view of the asset class and understand what is the likelihood of an active manager outperforming,” he said. 

“Our manager research due diligence would aim to find best-in-class managers. On the back of both assessments, we are then able to combine an active strategy that we have conviction in, into an asset class that we believe has a good likelihood of outperformance for active managers.”

His balanced multi-asset fund consists of 51 per cent equities, a 24 per cent wedge to credit and emerging market debt, and a further ten percent to alternative investments. 

We covered alts in depth last week and LGIM offered their thoughts on this, too. 

The team is invested across infrastructure, global real estate, commodities and absolute return strategies, with varying weightings depending on the product. Generally, according to Chua, the allocation to alternatives is lower for higher risk portfolios. 

In the latest rebalancing, the team maintained a reduced overall exposure to equities, anticipating slow economic growth this year. Specifically, LGIM increased their allocation to Pictet Clean Energy, expressing a more positive sentiment on the decarbonisation theme.