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LGIM launches core ETF range with ESG twist


Legal & General Investment Management has launched its first ETF range post the purchase of ETF Securities, close to a year ago.

The range represents plain vanilla, core low-cost equity ETFs, with LGIM commenting that this comes in response to feedback from clients that investors expect more from their core equity solutions.

LGIM has instituted a new index design that is designed to help shield investors from unpredictable behaviour of crowded trading that is experienced by equity indices commonly tracked by most core ETFs.  

LGIM writes that its new core equity range will ensure investors are not forced to turn over their portfolio at the same time as the vast majority of core equity ETFs in the market where short-term price volatility frequently occurs.  The risk from this volatility is increasing with the rise of index investing, which LGIM says highlights the need for change.

Howie Li (pictured), Head of ETFs at LGIM, says: “It’s right to expect more than just low-cost from core equity ETFs. Index managers need to be more active in mitigating the risks of crowded indices and engaging with companies for the long-term benefit of the market and investors. We have designed our range of core ETFs with these principles in mind, taking steps to promote long-term performance and stability.” 

LGIM’s core equity ETFs are designed to ensure companies in the portfolio meet minimum standards for best business practices in order to mitigate risks that may affect long-term investment performance. The range also has an ESG twist, incorporating LGIM’s Future World Protection List into the design, shielding investors from the negative future outlook associated with controversial weapons manufacturers, pure coal companies and consistent violators of the UN Global Compact. 

The firm writes that as part of LGIM’s management of over GBP984.8 billion of assets, the core ETF range, as with all of LGIM’s funds, are subject to the active scrutiny of LGIM’s corporate governance team who engage with companies to create sustainable long-term value for investors.

LGIM has partnered with index provider Solactive to manage and calculate the indices designed and used by LGIM’s core equity ETFs. 

Simon Hynes, Head of Retail Distribution, EMEA, says: “Our core equity ETFs can be used on their own or in conjunction with investors’ existing building blocks to help diversify issuer concentration risk. We believe our core range will be of interest to our clients due to the low cost and additional value they deliver compared to what’s currently available in the market.”

The core equity ETF range is managed by LGIM’s ETF portfolio managers within the Global Index Fund Management team.  The ETFs are listed on the London Stock Exchange and fees range from five to 10 basis points.

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