Legal & General has launched three developed world factor-based index funds for wholesale investors in the UK.
The new offerings are the L&G Developed World Momentum Factor Index, the L&G Developed World Quality Factor Index and the L&G Developed World Value Factor Index funds. Each tracks a customised iSTOXX index built on L&G’s proprietary factor scores and provides targeted exposure to developed market equities.
Ben Cherrington, head of UK wholesale, asset management at L&G, said: “Factor investing has been underrepresented in wholesale portfolios and so we have pooled our internal expertise to develop something that is both differentiated, while meeting the distinct requirements of our end-investors.”
The momentum fund delivers exposure to companies with strong recent performance or rapid short-term growth, while the quality tracker targets companies with positive income, high profitability and low leverage. The value fund invests in companies that appear undervalued compared with peers.
The iSTOXX indices tracked by the funds also take account of turnover and transaction costs, which L&G describes as a key practical feature of the strategies.
Factor investing is well established among institutional investors but remains less common in the wholesale market. L&G said the new funds respond to evolving investor demand for specific factor exposures.
Stefan Bilby, head of index distribution, asset management at L&G, added: “With the market environment remaining volatile and uncertain, the role for factor strategies is highly relevant given their ability to enhance diversification, manage risk and capture persistent sources of return.
The funds will be managed by L&G’s index team, which oversees more than £517bn in assets and has more than 35 years of experience.