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Legal & General IM suffers largest ETF outflows in Europe
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Legal & General Investment Management has suffered the largest capital outflows among European exchange-traded fund providers since the start of the year, ahead of the manager’s planned overhaul.
LGIM’s ETFs lost €2.7 billion in the first five months of 2024, dampening its growth ambitions, while the ETF industry as a whole saw net inflows of €78 billion, according to Morningstar data.
The bulk of the outflows came from a US equity fund that tracks a Paris-aligned benchmark, which saw net withdrawals of €1.65 billion. The second-lowest-selling fund, with €430 million in outflows, is also a Paris-aligned fund that invests in European stocks.
The manager has recorded net outflows from its ETFs every month since November 2023.
This article was previously published by Set Europe on firea title belonging to the FT group.
Legal & General, the manager’s parent company, has announced its intention to revision the company, creating a single asset management division by combining the investment management division with its alternative assets unit, Legal & General Capital.
Michelle Scrimgeour, LGIM’s chief executive, is expected to leave the company as part of the changes.
Legal & General IM said its flows this year were driven by “strategic asset allocation decisions” that saw clients “pivot their core regional exposures, while expressing continued confidence in our broader funds”.
“We believe we are well positioned in new and growing strategies, which continue to benefit from client demand and inflow, such as our Gerd Kommer Multi-Factor ETFs, Indian Bond ETFs and Commodities ETFs. improved raw materials,” added the asset manager.
Kenneth Lamont, senior research analyst at Morningstar, said there was “nothing to worry about” Morningstar in its assessment of Legal & General IM’s ETF flows.
The capital outflows from the two Paris Agreement-aligned funds come at a time when investors are reassessing their environmental, social and governance exposures, Lamont said.
He said a number of LGIM’s thematic funds had lost assets, part of a “broader trend of thematic exits as investors abandon riskier growth plays”.
He added that it was “not all doom and gloom” as the firm’s artificial intelligence fund had been a net beneficiary of the flows.
The AI fund has achieved €120 million in net inflows this year, making it Legal & General IM’s second best-selling ETF behind an enhanced multi-strategy commodities fund that brought in €170 million.
However, LGIM’s ETF exits appear to have dampened the asset manager’s growth ambitions, which were outlined shortly after the acquisition of Canvas, the European ETF platform owned by ETF Securities.
LGIM said In 2018, it said it wanted to become one of the top 10 ETF providers in Europe within five years.
The asset manager has not yet reached that bracket and its €13.6 billion in ETF assets under management represents less than 1 percent market share in Europe, according to Morningstar data.
José Garcia Zarate, associate director of passive strategies at Morningstar, said Legal & General IM was “hardly” on track to become a leading ETF provider “anytime soon,” although ETFs and indexing in general remain a strategic business focus for the firm.
“The company has seen growth in its assets under management, but so have its competitors, most of which have been in the ETF market for many years before it,” he said.
“No one doubts Legal & General’s proven expertise in indexing, but that alone does not guarantee success in a market where we are seeing increasing division between traditional supermarket-type providers and specialists.
*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.