Investments  

How LGIM can run an active MPS at 6bps

How LGIM can run an active MPS at 6bps
LGIM head of retail investments Justin Onuekwusi

Legal and General Investment Management (LGIM) is rolling out the model portfolio service it soft launched last year with an ongoing charge of 6 basis points across both passive and actively managed plans.

There are 25 portfolios in the range split between active and passive, income, growth and ESG mandates. 

The proposition is headed up by Justin Onuekwusi, the firm’s long-serving head of retail investments, and will bring together the teams which work on the company’s £7bn multi-index range of funds and the multi-manager funds. 

Onuekwusi said scale was behind the firm's ability to offer the 6 basis point fee, which is inclusive of VAT.

He said: “Scale is absolutely crucial in the MPS space right now. That hunt for scale is one of the reasons why we have seen so much M&A activity in the space.

"The advantage we have at LGIM is that because of our strength in multi-asset we already have the scale. That means we can come in at this pricing point.”

For comparison, the widely-held Vanguard Life Strategy funds come with an annual charge of 20 basis points, but have no active or bespoke element. 

LGIM's portfolios combine pure index funds, and pure active externally managed fund portfolios, and some which use LGIM’s internally managed active funds. 

The multi-index fund range has been in operation for nine years, and Onuekwusi told FTAdviser: “We met clients who told us they like the multi-index range and use it for some clients, but they wanted to know if we could do it in a model portfolio for others, and that is where the idea came from, from client demand.

"The aim is to combine the skillsets of both parts of the team, and to have a bespoke offering for clients.”

He said income portfolios were "probably best done in a bespoke way, but we have an off-the-shelf offer as well.

"We want to be able to use boutique managers there, to target a really high income for those clients that want that."

He said there were three ways to think about sustainability portfolios: those who use exclusions, those who want a sustainability focus, and those who want an impact investing focus.

"We have portfolios for that, and we are able to be bespoke and combine the different elements.

"What we really want is to have ‘models plus, with the plus being the element that is tailored to the client’s objective.

"For reasons of availability and liquidity it is probably too difficult to do a purely impact fund, so we would blend that with other types of sustainable funds."

The MPS range soft launched in December but is now being made widely available to advisers.

david.thorpe@ft.com