A simple cost-effective solution to help you serve your customers investment needs.

Transcription

1 A simple cost-effective solution to help you serve your customers investment needs. Nationwide Primary Fund Range from A suite of funds offering low-cost, straightforward, high-quality solutions to meet your customers investment needs. Each fund has a clear asset allocation range, allowing you to match funds to your customers based on how much risk they are willing to take. This is not a consumer advertisement. It is intended for professional financial advisers and should not be relied upon by private investors or any other persons.

2 2 ABOUT LEGAL & GENERAL is one of the UK s largest financial institutions. Established in 1836, the Group is a trusted provider to over nine million customers in the UK for our life assurance, pensions, investments and general insurance plans. As one of the UK s leading investment managers, Investment Management (LGIM) offers scale and expertise that can bring real benefits to customers. We look after 715 billion across a range of asset classes, with 295 billion of index funds and 29 billion of multi-asset funds (as at 30 June 2015). LGIM began managing index funds in the 1980s, and we launched our first retail index fund in Since then, we ve expanded the range to include diverse markets such as emerging markets, as well as fixed income index funds to meet customers evolving needs. LGIM has managed multi-asset solutions for over 35 years, enabling us to build on our expertise across different asset classes and create comprehensive customer-focused solutions. Citywire source and copyright: Justin Onuekwusi is AA rated by Citywire for his three year risk adjusted performance for the period 30 September September 2015.

3 3 A COMPREHENSIVE CUSTOMER SOLUTION A range of diversified portfolios designed to meet your customer needs The Nationwide Primary Fund range offers your customers access to a simple, cost-effective investment solution. The range includes eight funds designed to meet different customer requirements. There are six multi-asset funds that actively manage exposure to shares, bonds and alternative investments, along with two index-tracking funds that give diversified equity exposure. MULTI-ASSET TEAM INDEX TEAM 0-20% Fund 0-35% Fund 20-60% Fund 40-85% Fund Equity Trackers Global Equity Index Fund (N) Tracker Trust Lowest risk / lowest potential return Highest risk / Highest potential return Income 0-35% Fund Income 20-60% Fund HELPING YOU AND YOUR CUSTOMERS Simple and easy to understand We ve designed these funds so that they are easy for you to explain to customers: The Funds communicate the proportion of shares in each fund The Equity tracker funds show the equity markets your customer will be exposed to Income funds are clearly marked Simple Managed Asset Allocation ONE - STOP - SHOP Cost effective Managed asset allocation The Funds offer an asset allocation focused approach managed by our multiasset funds team. Academic studies have shown that 90% of a portfolio s return comes from asset allocation 1. We built the range to take account of the power of asset allocation in three key areas: As a risk-management tool to reduce the impact of volatile markets To access the risk management and return enhancing benefits of broad diversification To position the funds to reflect a constantly changing investment environment Cost-effective Whatever funds you use, index tracker funds will play a large part, as our Funds mainly use our own index funds as building blocks to create highly diversified portfolios. Using these index funds offers two key advantages: Potential to reduce costs: Reduce turnover and other expenses to minimise performance drag for your customers Potential to enhance returns: Add value through implementation of index changes, corporate actions and dividend enhancement 1. Does Asset Allocation Policy Explain 40, 90 or 100% of performance? Roger G. Ibbotson and Paul D. Kaplan, Financial Analyst Journal, January/ February 2000.

4 4 A SIMPLE SOLUTION TO MEET A RANGE OF CUSTOMER NEEDS The range has been assembled by Nationwide to aim to meet the needs of the different types of customers you serve, by offering funds with different long-term risk/return and income objectives. PRIMARY FUNDS FOR GROWTH Funds Equity Index Trackers 0-20% Fund 0-35% Fund 20-60% Fund 40-85% Fund 100% company shares Global Equity Index (N) Tracker LOW Customers risk tolerance HIGH Funds The name reflects the diversified nature of the exposure these funds provide, with the numbers corresponding to the proportion of company shares in each fund, allowing you to match your customers to different risk/return tolerances and expected outcomes. The funds serve as straightforward all-in-one portfolios. Equity index tracker funds These funds track an index to give your customers a return that closely follows the performance of either the UK stock market or global shares (as measured by the FTSE All-Share Index and FTSE World Index respectively). While both funds track a single index, each of these indices represent hundreds of underlying companies, reducing the risk of loss due to falls of any individual company. generally have a higher potential for returns than other investments, which also means a higher risk of loss, especially in the short term. PRIMARY FUNDS FOR INCOME We offer two income-focused funds. These aim to provide an enhanced yield while still maintaining the same broad risk / return profile as the other Funds. Reflecting this bias towards income, the mixed investment income funds will have different underlying holdings relative to the equivalent growth-orientated Fund. Income 0-35% Fund Income 20-60% Fund Aims to provide a regular income while maintaining a focus on capital preservation Aims to provide a regular income, but takes more risk in order to offer the potential to grow your customers capital and income

5 5 MANAGED ASSET ALLOCATION MIXED INVESTMENT FUNDS The Funds, managed by our multi-asset funds team, employ active asset allocation to help manage risk and reduce portfolio drift. Limits on equity investment are built into the fund process to ensure broad stability in the risk levels, while still giving our experienced asset allocation team the flexibility it needs to enhance returns and adapt to changing market conditions. ASSET ALLOCATION VS MANAGER SELECTION We believe that diversification and asset allocation are the keys to multi-asset fund returns. An assetallocation focused multi-asset solution carries a number of key benefits over other approaches such as multi-manager or manager selection. Diversification through manager selection Diversification through asset allocation ADVANTAGES Different views from different managers Potential for more active security selection DISADVANTAGES Risk of loss of star fund manager Risk of inconsistent / uncoordinated views Risk of portfolio drift Risk of missed rebalancing to remain suitable Extra due diligence requirement Potentially higher fees More complexity ADVANTAGES Focus on asset allocation Team-based approach Efficient management of portfolio drift Full line-of-sight to risk no unintended consequences Easy to understand Cost-effective Focused due diligence DISADVANTAGES Risk of less perceived diversification Less scope for active management at individual security level BROAD DIVERSIFICATION The Fund range offers real diversification across a wide range of funds, asset classes, countries and holdings in a single package. Each fund includes: different funds and asset classes Equity investments across over 45 countries Over 5,000 underlying holdings We deliver this broad diversification in a simple, transparent package. It s easy to keep customers informed through a single Key Investor Information Document and regular factsheet. This gives customers more of an at a glance overview of where their assets are invested, rather than having to look at one for each fund of a number of individual managers.

6 6 MANAGED ASSET ALLOCATION AN EXPERIENCED AND EXPERT TEAM The Funds are managed by our multi-asset funds team specialists in multi-asset solutions who also draw on the capabilities and resources of the broader LGIM investment platform. THE TEAM IN NUMBERS 240+ Combined years experience of multi-asset funds team 11 Average number of years experience of the multi-asset funds team 32 Investment professionals across the broader asset allocation team 29bn The amount of assets the team manages, generating operational scale and efficiency SPECIALISATION CREATES AN EDGE THAT DRIVES SUCCESSFUL INVESTING Economists lead the macro economic discussion Three teams of specialists collaborating to drive investor outcome Strategists augment this with asset class research and translate views into trade proposals Cooperative approach, with discussions in economics, strategy and fund management spanning across teams Fund Managers oversee the overall portfolio taking into account market conditions and risk exposures WHERE WE INVEST We make extensive use of index funds within our Funds. This helps us offer transparent, high-quality asset allocation and wide diversification in a cost-effective way. CORE ASSETS Alternatives and cash L&G UK Index Trust L&G US Index Trust L&G European Index Trust L&G Japan Index Trust L&G Pacific Index Trust L&G Global Emerging Markets Index Trust Alternatives and cash i Global Infrastructure ETF i Developed Markets Property Yield ETF LGIM Commodity Composite Source ETF LGIM Sterling Liquidity Fund (Active) L&G All Stocks Gilt Index Trust L&G All Stocks Index Linked Gilt Index Trust Targeted country bond futures (e.g. US, Germany, Australia) L&G Global Inflation Linked Bond Index Funds L&G Sterling Corporate Bond Index Fund L&G Short-Dated Sterling Corporate Bond Index Fund L&G Fixed Interest Trust (Active) LGIM Global Credit OEIC (Active) L&G High Income Trust i Emerging Markets Local Government ETF L&G Emerging Markets Government Bond (US$) Index Fund For illustrative purposes only

7 7 COST EFFECTIVE INDEX FUNDS Investment Management is one of the UK s largest managers of index tracker funds. The Primary Funds range offers direct access to two of these funds, and our Funds also use these as cost-effective building blocks to create diversified portfolios. COST MATTERS Using index funds either directly or as a key component in the Funds helps keep the overall costs of your customer portfolios low. The cost-aware approach is reinforced by the economies of scale, expertise and efficiency as one of the UK s largest managers of index trackers. LOWER COSTS CAN HAVE A SIGNIFICANT IMPACT ON YOUR CUSTOMERS INVESTMENT OUTCOME OVER THE LONGER TERM. As per the chart below, over 30 years, a customer in an index fund paying fees of 0.10% on an investment of 100,000 with a uniform gross rate of 6% per annum would gain just over 450%. A customer in an active fund paying 0.92% fees would achieve a return of just under 350% due to paying over 116,000 more in fees than the index fund. % Increase 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 0.10% Typical UK index fund fee Increase to investment = 458% 0.92% Typical UK active fund fee Increase to investment = 342% Years A COST EFFECTIVE WAY TO TAKE A UK OR GLOBAL VIEW Nationwide customers using the Primary Funds range have access to two index funds. The (N) Tracker Trust aims to provide customers with the returns of the UK stock market. For those wanting a broader investment, the Global Equity Index Fund tracks a global benchmark, which includes the UK, but also provides exposure to markets such as the US, Europe and Japan. Global Equity Index Fund (N) Tracker Trust Index tracked FTSE World Index FTSE All-Share Index No of companies represented in index Market capitalisation of index ,000 billion+ 2,000 billion+ Fund size 33 million 1,389 million Source: LGIM, FTSE Figures as at 31 August 2015

8 8 WHY LEGAL & GENERAL SCALE EXPERTISE SIMPLICITY RESPONSIBLE INVESTING LGIM is one of the We have a large and We prefer to invest We believe that being biggest providers of well-resourced team in physical securities a market leader index funds in the UK, who have developed an wherever possible means that we have and all our funds are UK in-house philosophy for and use derivatives a responsibility to domiciled. Over the past index fund management sparingly and only ever work closely with the 25 years we ve grown that we call pragmatic for efficient portfolio companies that we to manage 295 billion replication. What management. We don t invest in. Being an in index funds and 715 this means is that operate a securities active owner in these billion in total (as at 30 while our main aim is lending programme companies represents June 2015). This scale close tracking of the either, so our a tangible way in which means that we are able index, we also put a customers exposure we can positively to generate significant lot of time, effort and to additional risks is impact the constituents efficiencies and cost resources into trying to minimised and our of our index funds, savings which we can maximise returns for index funds are kept as effecting change and then pass on to our our customers day in transparent and easy to improving company customers. and day out. understand as possible. performance. This is a win-win situation, as by doing the right thing we believe we can materially improve long-term returns for our customers. KEEPING YOU INFORMED We have a range of materials to keep customers informed on their investments and our latest market views. The value of investments and any income from them can fall as well as rise, is not guaranteed and your clients may get back less than they invest. These funds may invest overseas. Changes in exchange rates between currencies may cause the value of an investment and the level of any income to rise or fall. These funds are sensitive to interest rate changes. An increase in medium to long-term interest rates is likely to reduce the value of an investment in these funds. The funds invest in riskier bonds, known as sub-investment grade bonds. These bonds pay higher interest rates to try to provide more attractive income returns. To achieve this, greater risk is taken as the companies are more likely to miss payments or not repay the loan, resulting in the returns your clients investment falling. All rights in the FTSE World Index and FTSE All-Share Index (the Index ) vest in FTSE International Limited ( FTSE ). FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. The Global Equity Index Fund and (N) Tracker Trust have been developed solely by. The Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the funds and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Global Equity Index Fund and (N) Tracker Trust. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Global Equity Index Fund and (N) Tracker Trust or the suitability of the Index for the purpose to which it is being put by. (Unit Trust Managers) Limited. Registered in England and Wales No Registered office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority. Q /15 H