Legal & General Becomes First £1 Trillion UK Fund Manager

Legal & General has become the first UK company to manage over £1 trillion of assets. Having increased assets under management by 3% over 2018 the FTSE 100 insurer is now only second to Paris-based Amundi among Europe’s biggest fund managers. Not only is Legal & General managing more and more of the UK’s savings and investments but it is doing so more profitably. A 10% rise in profits was also announced, driven by record sales of annuities.

Despite the good news the Legal & General share price has dropped since Tuesday of this week, down over 5% between Tuesday’s close and Wednesday morning. The fall came as a result of analyst warnings that the focus on annuities is capital intensive and may impact on L&G’s future potential to keep increasing its dividend.

Regardless, passing the £1 trillion mark for assets under management is a major achievement for a company that managed just £200 billion 12 years ago. Legal & General has transformed itself from an insurer and provider of defined contribution workplace pensions into an international asset management powerhouse offering a broad range of investment vehicles. The company now holds a 1.6% share of the $80 trillion global market for funds.

Over the course of 2018, Legal & General’s fund management unit managed to add £42.6 billion in assets under management despite a tough year for the industry as markets fell over the last few months of the year. Across the group operating profits grew 10% to £1.9 billion. £10 billion worth of annuities were sold. £433 million in cash reserves earmarked for pension commitments were released after the rate of improvement in UK life expectancy slowed.

Forward guidance provided by chief financial officer Jeff Davies announced that the company is actively quoting on £20 billion in annuity offers for this year, with the market forecast to reach a record level of £30 billion.

The success of Legal & General’s fund management business is also another example of how sustainable investment policies are no longer any barrier to profitability for either investors or fund providers. Last year the company sold off holding in 8 companies due to their poor record on introducing corporate governance policies to help fight climate change.