CompaniesMay 24 2013

L&G plans for 20% surge in passive sales

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ByMichael Trudeau

Pressure on costs could drive growth in sales of passive funds of up to 20 per cent a year, Legal and General has said.

Simon Pistell, managing director of Legal and General Investments, told FTAdviser the company’s five-year view suggests growth in the passives market could far outstrip current trends.

He said: “A continuation of current trends would equate to a compound annual growth rate of 8 to 10 per cent.

“Our view of post-[Retail Distribution Review] acceleration of passive retail funds is a compound annual growth rate of 11 to 20 per cent.”

Mr Pistell estimates about 36 per cent of investments in the institutional market are in passive funds, whereas passive investments currently make up less than a tenth of the retail market.

He believes increased price competition will not only drive business towards passives but will also go some way towards filling the predicted advice gap over time.

“There will be a much greater emphasis on total cost of investment. If you are an advisory business worried about the total cost of investment, the most obvious thing will be to use more passive funds in your portfolio.”

He added L&G is one of the largest providers of passives in the country, accounting for just under a quarter of the market.

Last week, FTAdviser sister publication Money Management reported that L&G had hinted at the launch of further index-tracking products.

In summer last year (20 August) the company announced its intent to launch a passively-managed sterling corporate bond fund, which at the time was awaiting approval by the Financial Services Authority.