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LGIM launches new diversified fund

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Legal & General Investment Management (LGIM) has launched a new diversified fund designed with the needs of the long-term pension investor in mind.

The new LGIM Diversified Fund is designed specifically with the long-term pension investor in mind and is available to both DC and DB pension scheme investors. It aims to help pension fund investors who are looking for long-term growth in a fund designed to deliver less volatility than pure equity-only funds. The long-term expected annualised rate of return for the fund is broadly similar to that of a developed market equity fund, but the diversified nature of the fund means that it is expected to have less exposure than a pure equity fund to adverse equity market conditions.

The LGIM Diversified Fund gives investors exposure to a globally diversified range of asset classes including: Developed market and emerging market equities; Smaller company equities; Private equity (via listed private equity companies); Developed market and emerging market government bonds (including inflation-linked); Corporate bonds (both investment grade and high yield); Direct property and real estate investment trusts; Infrastructure (via listed infrastructure companies); and Commodities (via the newly-launched LGIM Commodity Composite Fund, which gains its exposure using a blend of commodity derivatives.

To keep costs low and to achieve a high level of diversification, the majority of sub-funds in which the fund invests are managed on a passive (index-tracking) basis.

LGIM Diversified Fund’s strategic asset allocation is derived using similar investment strategy techniques to those used with LGIM’s largest pension and insurance clients, giving investors access to expertise traditionally only available to large institutional investors.
The long-term strategic asset allocation of the fund will be reviewed periodically (typically annually), to reflect any changes in long-term asset class dynamics or to incorporate any newly-available asset classes.

Consistent with its long-term focus, the LGIM Diversified Fund does not take short term tactical positions, and so the asset allocation of the fund is unlikely to change significantly between these annual reviews. This relatively stable approach helps to reduce turnover and trading costs, which can have a significant negative impact on investors’ returns over the long-term.

Hugh Cutler, Head of Europe and Middle East, Institutional Business, LGIM says: “The high volatility of many asset classes in recent years, coupled with the very low returns being offered by the safest and most secure assets, has left many investors with an investment conundrum. Investors realise that affordable long-term pension investment requires exposure to higher-returning assets, but many investors have been wary of the risks inherent in too great a bias to equities. The LGIM Diversified Fund aims to help investors by offering a cost-efficient exposure to a wide range of asset classes, aiming to control risk by utilising a high level of investment diversification and a focus on efficient implementation using mainly passive index-tracking sub funds.”
 

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