Managed by the group’s asset allocation team, with Martin Dietz as lead manager, the LGIM Retirement Income Multi-Asset Fund has a target of the BoE base rate plus 3.5% over a full market cycle, which LGIM defines as five to seven years and aims to be less than half as volatile as developed market equity markets.
According to LGIM, the fund aims to provide long term investment growth, both leading up to and through retirement, while at the same time facilitating the drawdown of retirement income.
LGIM's offering joins a handful of products which have been launched by asset managers in response to the changes announced in the UK Budget earlier this year. Threadneedle was the first to come to market with a fund at the end of July, managed by Toby Nangle.
Emiel van den Heiligenberg – head of asset allocation at LGIM, explained: “We are committed to providing innovative investment solutions that deliver improved outcomes ‘to and through retirement’. Clients relying on income drawdown in retirement need reliable long-term asset returns and this is exactly what the Retirement Income Multi-Asset Fund is designed to provide.”
Dietz explained the fund is an “evergreen fund” that will have investors at various stages of life and retirement planning and, in order to ensure that it can implement the drawdown facility required at as low a disinvestment cost as possible, the fund is focused on both risk and cash flow management.
“The idea is to provide clients with the peace of mind that they can draw down in retirement without fear of running out of money,” he said.
According to Dietz, the working assumption for the fund, is that clients are likely to want to take more than the natural income in drawdowns, but said this is a fund for investors that do want to stay invested.
“We could lock in all the cash flows up front, but that would be no different from an annuity, we are looking to be able to provide immediate cash flows through short term holdings, while at the same time taking risk in the longer term to lock in future cash flows," he said.
The fund has is part of LGIM’s PMC range of unit-linked life insurance funds and are thus available to institutional clients, but the fund has a minimum investment of £1. The fund’s total expense ratio is 36 basis points.
