Index

Each of these pillars supports one purpose: providing our clients with everything they are entitled to as asset owners, not just an index’s returns.

Pragmatic replication

At LGIM, we have developed our own philosophy on the management of index strategies that we call ‘pragmatic replication’, an approach that is focused on delivering the best value for our investors. The overarching objective is to track the benchmark index as tightly as possible, using our in-house expertise, resources and technology to undertake comprehensive research aimed at enhancing investor returns when managing index changes.

Through such techniques, we believe we can reduce turnover and costs when trading and seek to maximise returns by exploiting any short-term mispricing or inefficiencies.

How do we embed responsibility and ESG in our index strategies?

Clients trust us to manage, safeguard and grow the value of their assets. We take this responsibility seriously, and we manage our index strategies responsibly. As part of this commitment, we integrate rigorous ESG criteria into our index strategies where our clients give us the mandate to do so. Fundamentally, we believe that companies that appropriately manage their ESG profile generally deliver better investment value over the long term.

We seek to meet these obligations in our index funds through the combination of three approaches:

 

01

Through company engagement: as a major global investor, we can have meaningful dialogue with corporate boards and executives on matters that impact long-term financial returns. We take a truly long-term view and use our scale to influence decisions.

02

Through a broader corporate governance lens: we address emerging issues, escalate concerns, and collaborate with other stakeholders, regulators and policymakers.

03

Through ESG integration: we can use our proprietary scoring tool to deliver meaningful improvements in our index strategies’ ESG profiles. Our ‘tilting’ approach allocates more capital to companies with higher ESG scores and less to companies with poor ESG scores, which we believe provides a compelling blend of impact, transparency, and market exposure.

 

Whilst LGIM has integrated Environmental, Social, and Governance (ESG) considerations into its investment decision-making and stewardship practices, this does not guarantee the achievement of responsible investing goals within funds that do not include specific ESG goals within their objectives.

*Source: LGIM internal data as at 30 June 2024.  Includes assets from associates and is based on managed AUM, including £1.5bn from multi-asset strategies.