LGIM's ETF head Li plots expansion one-year after entering the European market

Tom Eckett

a man in a suit

It has been a year since

Legal & General Investment Management entered the European ETF space

following the completion of its Canvas acquisition from ETF Securities and head of ETFs Howie Li is readying the business for future growth.

In November 2017, it was announced Canvas had been sold to LGIM, bringing across $2.7bn assets under management (AUM) and 17 products across equity, fixed income and commodities. The acquisition completed the following March.

Speaking to ETF Stream, Li (pictured) said the business still remained some way off its target of transitioning to an all-round ETF provider, instead of being known as a specialist in thematic investing, which he expects will take place over the next two years.

Li is tackling this change in three ways. One is to expand its product offering, two is expansion to Europe and the wholesale market, and the final is around active engagement in index creation.

The firm's first move to address its shop window came last November when it launched a six-strong core equity ETF range, which currently has around $450m assets under management (AUM), with ongoing charges figures (OCFs) between 0.05% and 0.10%. Overall, Li wants to be offering around 50 products by the end of the year.

LGIM also has plans to launch a core fixed income ETF suite however, Li said this remained further down the pipeline.

"We need the building blocks as most asset allocators still use ETFs benchmarked to market cap indices for their core exposure," Li said. "The launch of our core equity ETFs highlighted our commitment as a full-service provider."

Another area of focus will remain the thematics range as Li noted this is an area the firm is known for from its time under the Canvas brand.

The number of thematic ETFs listed in Europe last year quadrupled to 16, according to Morningstar, while annual inflows jumped from £158m in 2014 to £1.8bn.

"We want to continue to expand our thematic range as more investors are looking to include this in their portfolios."

Factor investing is an area of big focus for the firm. Li said LGIM will take active steps in designing indices with the index providers in order to "capture the changing investment landscape".

One key trend Li predicted could occur was asset allocators moving away from traditional market cap indices for their core exposure into more exotic plays such as factors.

This, he said, would be a major disruption to the European ETF market from a growth perspective as the volumes of trade would shift away from market cap products.

"Factors can be a big driver for returns however, the construction is key," Li continued. "Rather than buying an index off the shelf which is already used by other ETF providers, we want to make sure our proposition is designed by us actively because we will be responding to investor demands.

"We want to ensure that investors, when holding one of our products they understand how it sits in their portfolio."

Continental Europe

The final part of LGIM's approach to becoming a full-service ETF provider is expanding its presence across Europe and the wholesale market.

In Europe, Li said the firm will have a focus on Germany and Italy, utilising the existing relationships LGIM has on the active side of the business.

This also involves expanding the distribution team which was demonstrated by the appointment of BlackRock's Giancarlo Sandrin in December to head up its new Milan office.

"Germany and Italy have traditionally been big ETF buyers [compared to the rest of Europe]. This is about expanding rather than switching focus as the UK must remain a key focus for us."

Featured in this article


No ETFs to show.