LGIM eyes retail smart beta product roll-out

The group offers smart beta products to institutional investors, but said it was now eyeing retail investors as new targets for the capability.

Competition in the passive space is growing, with fund groups battling to provide investors with the lowest cost for access to equity markets. Several groups have recently slashed the cost of their tracker funds or exchange traded funds, including Fidelity and Vanguard.

As a result, some houses with an established passive presence are looking to garner further sales by bringing smart beta products to the market.

These are passive structures, but rather than being based on an index which uses conventional market capitalisation, the funds will track an index based on a factor, such as having an equal weighting in each stock.

Dan Attwood, proposition manager of index funds at LGIM, said: “We currently offer smart beta products that are not market capped and are alternatively weighted in the institutional space. We are now seeing demand in the retail space and are looking to launch new unit trusts.”

Mr Attwood said the demand for smart beta capabilities in the retail space was following a similar pattern to the institutional space – where the initial demand seems to be for equities, with a slightly slower demand developing for bonds.

In terms of regions, Mr Attwood has seen particularly strong demand for Pacific and emerging market funds.

Mr Attwood said: “Investors are seeing that it is hard for active managers to generate returns in emerging markets, but still want exposure – so they are opting for passive and smart beta funds.

“Passive funds can allow access to the evolving picture of emerging markets as countries come in and out of indices.”

LGIM started offering institutional smart beta in 2006 and has been expanding its range of offerings since then.

It currently provides a range of equity offerings, including emerging markets and all-world equities.