L&G increased its operating profit very steadily with a ten-year CAGR of 9% (excluding the publication of mortality reserves, but including 2020 results). Mainly due to the pandemic, the company`s operating profit decreased slightly in 2020, but is expected to recover, as shown in the presentation of the 2021 results. Between 2011 and 2019, the company increased its earnings per share (EPS) at a CAGR of 9.7%. For the first half of 2021, the company reported earnings per share of 17.78 pence, up 265% from the 2020 low and up 9.8%, based on a two-year CAGR. Most public and multi-employer plans are looking for innovative ways to close their funding gaps, reduce fees and increasingly use their assets to make a positive difference in society and in long-term investment outcomes. We work with our clients to select cost-effective indexing strategies that we believe best meet their planning needs. In addition, some clients are looking to replace active equity managers or supplement exposure to the market capitalization-weighted index with index strategies based on diversification factors. These strategies are a cost-effective alternative that we believe can improve the overall risk-return profile of many plans. We also work with our clients to innovate in more passively aware fixed income portfolios, which we believe can better manage short-term cash flow needs while improving the efficiency of their return-oriented assets.
Often, these solutions include multi-asset overlays that help clients maintain desired policy allocations, hedge tail risks, and add value through tactical asset allocation decisions. While many DB business plans face similar challenges, our experience shows that each has unique perspectives, needs, and goals. We work with clients to help them imagine and follow the “Endgames” of their pension plan to desire. Over the past decade, we`ve seen clients take the path to reducing funding ratio risk by introducing long-term credit benchmarks, implementing customized, liability-driven programs, and using sophisticated risk management overlays to achieve their end goals. In some cases, this endgame meant building a low-income, long-term active portfolio whose cash flows are designed to closely track the expected performance payments of the plan in the future. These solutions are particularly attractive for schemes whose objective is long-term self-sufficiency or even the ultimate objective of transferring pension risk. To complement our solutions offering, in 2017 we introduced our private credit capabilities, which can provide increased yields and diversification for solutions that do not require liquidity from public credit markets. In this report, we analyzed 297 funds managed by Legal & General from their range of mutual funds, ETFs, life insurance funds and pension funds. Each fund has been analyzed for comparative performance over the past 1, 3 and 5 years, as well as all other funds in their respective sectors. Based on its performance, each fund then received a rating of between 1 and 5 stars.
L&G`s forecast P/E ratio, based on its estimate of earnings for fiscal 2021, is approximately 9. This is favorable compared to the average P/E ratio of 11 for six years, given the share price observed after the annual earnings announcement. Similarly, the estimated forecast P/B of 1.7 suggests that stocks are undervalued relative to the six-year average P/B of 2.0. The Fund Center tool provides you with detailed performance and fee information, as well as a fund fact sheet for each of the funds available to you. The £300 million L&G Asian Income Trust Fund is ranked excluding Japan alongside 98 competing funds in Asia-Pacific AI. Over the past 12 months, this fund has recorded losses of -11%, which was the worst in the industry and well below the average growth of 11.28% that the sector achieved for the period. One of Legal & Generals` worst-performing life insurance funds was the L&G UK Alpha Fund. This fund is allocated to the LF UK All Companies sector and over the last 5 years, this fund has recorded significant losses of -31.38%, which ranks it 529th out of 530 funds in this sector.
* LGIM America is the subsidiary of Legal & General Investment Management (LGIM), based in London. Pensions & Investments (P&I) Ranking of total institutional assets under management worldwide as of December 31, 2021. Special issue “The Largest Money Managers” published on June 6, 2022. The largest asset managers in 2022 | Pensions & Investments (pionline.com) This ranking does not mean that LGIM America will have or has succeeded with its product or service offerings. Legal & General is a FTSE 100 company and one of the oldest and largest insurance companies in the world with a legacy dating back to 1836. They are the UK`s largest fund house, and just last year, the group`s chief executive, Nigel Wilson, told investors that their wealth management arm was “built for the future”, with “the best team we`ve ever had”, with their total assets now reaching £1.2 trillion. L&G`s business model has a proven track record, is highly resilient (as highlighted by its continued strong performance in 2020) and highly profitable. The company benefits from several structural and economic capital synergies (slide 5, Capital Markets Event Overview 2021), as it has built what I consider to be a self-strengthening and, to some extent, autonomous company: Our analysis showed that of the 297 funds analyzed, 12% received a 4- or 5-star rating by consistently being among the top performers in their sectors during the periods analyzed. 23.9% rated as a 3-star performance fund With the overwhelming majority, 63.3% consistently performed in the bottom half of their sectors and therefore received a poor performance of 1 or 2 stars. Legal & General currently manages 65 life funds. Our analysis of these 65 funds revealed that 5 of them consistently maintained a 25% higher sector ranking in each of the 1-, 3- and 5-year periods analyzed. In contrast, 37 of the 65 L&G Life funds received a poor 1- or 2-star performance.
This fund has consistently performed well in the industry and has been the leading growth fund of the 824 funds in its sector over the past 1 year with growth of 13.13%. In comparison, the sector recorded average losses of -9.31% over the same period. Note: All funds are subject to fees and expenses to cover the operating costs of the funds. The L&G Growth Pension Fund is a UK-focused fund and is part of the Pn UK All Companies sector. The fund typically invests between 80% and 100% in shares of UK companies, with Experian, 3i Group and Rentokil being the fund`s 3 largest holdings. The objective of the fund is to invest in companies that they consider undervalued and thus offer growth potential from their recovery. However, the fund`s biggest involvement is the St. James`s Place fund manager, which many believe is the opposite of undervalued, especially in the current climate.
The fund itself has always been among the worst in its sector in terms of performance and in the last 12 months alone, it has recorded huge losses of -20.93%, which was worse than 94% of the funds in its sector. Legal & General manages 140 pension funds that have a performance history of at least 1 year and 94 have a performance history of at least 5 years. Among L&G pension funds with a 5-year history, 4 (4.25%) of these funds consistently achieved a sector ranking of the top quartile in each of the 1-, 3- and 5-year periods analyzed. LGIM, the company`s investment management business, continues to record net inflows (see below). This is due to the company`s diverse range of joint index funds, but also to government pension fund inflows (for example, a £37 billion mandate with the Japanese government`s Pension Investment Fund in 2019). 25 of the 297 funds analyzed for this report are exchange-traded funds (ETFs). Our analysis of these ETFs ranked 1 as 5-star rated funds, 7 as 3-star rated funds, and the other 17 as 17 as 1- or 2-star underperforming funds.