Legal & General UK 100 Index Trust: June 2021 update

Alexander Watkins | Wed 23 June 2021

The links in this article will take you to Hargreaves Lansdown’s main website for more information. Please be aware that if you wish to join any of the benefits in your company Plan you must return to this website to apply.

• Legal & General is one of the UK's leading providers of passive funds
• We think this fund is an excellent option for accessing the UK's largest companies
• The fund is a simple, low-cost way to track the FTSE 100
• This fund features on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Legal & General UK 100 Index trust invests in the 100 largest companies in the UK. While the FTSE 100 is a UK index, many of the companies also earn money overseas. That means investors will be indirectly investing in foreign economies as well as the UK.

An index tracker fund is one of the simplest ways to invest, and we think this fund could be a great, low-cost starting point for a portfolio aiming to deliver long term growth. It could be a good addition to a more global portfolio or to diversify a portfolio focused on smaller companies or bonds.

Manager

Legal & General has been running index tracker funds longer than most. It's also one of the largest providers of tracker funds and has the biggest index team in the UK. That means it's got the resources and expertise to track indices as closely as possible, and the scale to keep charges to a minimum.

Each index fund at Legal & General has a primary and secondary manager, though in practice the team as a whole helps to manage each fund. Alongside the wider team, Jason Forster is responsible for UK fund management and is the primary manager for this fund. He previously worked on the firm's index fund management systems before becoming a fund manager in 2002. Konstantins Golovnovs is the secondary manager. He joined Legal & General's graduate scheme in September 2010, completing various rotations across the business and moved into his current role in 2011.

Process

The fund aims to invest in every company in the Index and in the same proportion. This is known as full replication and helps to closely match the performance of the index over time. The fund is focused towards the financial, consumer staples and industrial sectors and the top 10 companies make up 41.8%.

Legal & General will try to reduce trading within the fund as it drives up costs. Higher costs can lead to a bigger tracking difference between the fund and its benchmark – not what they want to happen.

Legal & General is also a conservative tracker fund manager. For example, they don't lend investments like some other companies do.

Culture

Legal & General has continued to develop their passive fund range over the last 30 years. It has around £400bn invested in this part of the business, allowing it to offer a wide range of index-tracking options. It's built a team of experienced passive fund specialists and they're innovative too. If an index doesn't exist for a sector they'd like to track, they'll often work with index providers like FTSE to create one so they can track it.

We also admire Legal & General's commitment to encouraging good corporate practices among the companies they invest in. They proactively engage with businesses and use proxy voting rights to highlight important matters like environmental, social and governance issues.

The team running this fund works closely with various risk departments across the business. We believe this provides support and adds challenge where appropriate.

Cost

The fund has an ongoing annual fund charge of 0.10%, but a discount of 0.04% is available for HL investors, which reduces the charge to 0.06%. We believe this is good value when compared with other FTSE 100 tracker funds. Our platform charge of up to 0.45% per annum also applies.

Performance

The Legal & General UK 100 Index Trust aims to track the FTSE 100 Index and has done a good job over the last ten years. As you would expect from an index tracker fund, it's fallen behind the benchmark over the long term because of the costs involved in running the fund such as dealing charges and spreads. However, the techniques used by the managers have helped to keep performance as close to the index as possible and reduced the fund's tracking difference.

Last year saw the sweeping effects of covid across the globe impacting even the UK's largest companies. Since then, an extensive vaccine rollout and continued government intervention has supported their rebound with the FTSE 100 index returning over 18%* in the last year.

Given Legal & General's size, experience and expertise running index tracker funds, we expect the fund to continue to track the index well in the future, though there are no guarantees. Remember, past performance isn't a guide to future returns.

A glance at the five-year performance table below shows that in some years the fund has tracked the index closer than others.

Past performance is not a guide to the future. Source: *Lipper IM to 31/05/2021.

Find out more on Legal & General UK 100 Index, including charges

Legal & General UK 100 Index Key Investor Information