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LGIM reviews three funds after underperformance

LGIM reviews three funds after underperformance

Legal & General Investment Management has outlined three of its funds will be subject to a comprehensive review after underperforming.

In its 101-page assessment of value report, LGIM said 75 out of 78 funds assessed delivered value for investors in the year to December 31.

However, the Legal & General Asia Pacific Equity Income Fund, the Legal & General European Equity Income Fund and the Legal & General UK Equity Income Fund were all highlighted as underperforming.

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Interim chair of LGIM, Margaret Ammon, said the underperformance was “disappointing”.

"Three funds are not delivering the broad, long-term performance outcomes that [investors] should expect," she said.

“We are aiming to swiftly and appropriately remedy this."

Ammon said the company had already made changes to the investment team on the UK and Asia Pacific income funds within the past two years.

From five to three

Last year the fund house identified five funds requiring improvement, of which the UK Equity Income Fund and Legal & General Asian Income Trust, now renamed as a fund, were part of.

As a result, on March 17 this year both funds’ objectives were changed, to deliver an income above that of their benchmarks while aiming for capital growth over a five-year period, extended from the previous three-year period.

LGIM said the longer time horizon will allow the funds to achieve their objectives across different market conditions.

The UK equity income fund returned between 6 per cent and 5.5 per cent in the three years to December 31 2021, depending on the unit class, compared to the benchmark, the FTSE all-share index, returning 8.29 per cent.

The European Equity Income Fund returned between 12.7 per cent and 11.9 per cent, compared to its benchmark of 12.5 per cent over a three year period, and the Asia Pacific Equity Income Fund returned between 3.6 per cent and 4.5 per cent, compared to its benchmark of 12.14 per cent, over the same period. 

As a result of the value assessment last year, the Legal & General Real Income Builder Fund was closed, and fees were reduced in certain unit classes for the Legal & General Global Equity Index Fund and Global Inflation Linked Bond Index Fund.

Another fund, the Legal & General UK Special Situations Trust, was merged into the Legal & General Future World Sustainable UK Equity Fund after approval by unit holders. The merger was completed in March this year.

A further 12 funds were highlighted by the investment manager as needing improvement in this year’s value assessment.

These are:

  • L&G Active Short Dated Corporate Bond Fund
  • L&G All Stocks Index Linked Gilt Index Trust
  • L&G Distribution Trust 
  • L&G Dynamic Bond Fund 
  • K&G Future World Sustainable European Equity Focus Fund
  • L&G Future World Sustainable Opportunities Fund
  • L&G Global Equity Index Fund
  • L&G Global Health & Pharmaceuticals Index Trust
  • L&G Tracker Trust 
  • L&G UK Mid Cap Index Fund 
  • L&G US Index Trust 
  • L&G Worldwide Trust 

The funds are analysed and measured against seven areas, including the cost, performance and the overall quality of service offered by LGIM.

A spokesperson for LGIM said: "We continue to work hard to ensure that our funds offer investors value for money and deliver the best service in helping people save for their future.

"This year, we have evolved the assessment process by incorporating more information into our quality of service assessment, as well as providing insights on how our funds invest responsibly across the seven criteria.”