The Fund, which celebrated its third anniversary at the start of January, is designed for pension fund investors looking for long-term growth with less volatility than pure equity-only funds. It seeks to do this through exposure to a diversified range of asset classes. A cost-efficient and transparent structure means it continues to prove popular amongst both DB and especially DC investors, following the introduction of the charge cap and the stronger focus on investment efficiency of DC default funds. In the three years since inception, the Fund has returned 11.9% p.a. – making it an attractive proposition compared to its peers.
Emiel van den Heiligenberg, Head of Asset Allocation at LGIM, said,
“In a low return world, investors realise that they need exposure to higher-returning assets such as equities. But that exposure can bring additional risks. However, a truly diversified fund has less exposure to adverse equity markets than a pure equity fund and therefore demonstrates less volatility. Little wonder then that diversified funds are attracting clients in ever greater numbers.”
The LGIM Diversified Fund typically holds between 20% and 50% of its assets in bonds. The remaining 50% to 80% is held in a range of assets, including equities, property, commodities and the shares of infrastructure companies. The Fund achieves its exposure to each asset class predominantly through investing in passively managed (index tracking) funds, with selective use of active funds where appropriate. This keeps costs to a minimum and helps to achieve a high level of diversification in the Fund.
The LGIM Diversified Fund does not make tactical or short-term asset allocation changes, but it is subject to an annual review to ensure that its current asset allocation reflects the fund managers’ best thinking in terms of long-term asset allocation.
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