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Legal & General Future World ESG Emerging Markets Class C - Accumulation (GBP)

Sell:52.44p Buy:52.44p Change: 0.50p (0.94%)
Prices as at 19 July 2024
Change: 0.50p (0.94%)
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Prices as at 19 July 2024
Change: 0.50p (0.94%)
Prices as at 19 July 2024
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

Our view on this Fund

This fund is on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. However, this is not a recommendation to buy.

We think this fund is a good option for broad exposure to the emerging stock markets, while being mindful of environmental, social and governance (ESG) issues.

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 in a responsible way. It could also be a good addition to a portfolio of other tracker funds.

Our view on the sector

The emerging markets are a diverse range of economies stretching from Asia and Eastern Europe to South Africa and Latin America. Some are rich in commodities and natural resources, some rely on exporting goods to Western economies, and others have a vibrant consumer-driven society. They're all at different stages of economic development and while we think they've got great long-term growth prospects, they're more volatile and higher-risk than more developed ones. We think a broad global emerging markets fund could be a good starting point, then there are others that focus on a specific country or region.

Performance Analysis

The fund's tracked its index well since launch in April 2022. Over the long run, we'd expect the fund to fall behind its benchmark because of the costs involved in running the fund. Although this is typical of all tracker funds. The techniques used by the managers have helped to keep performance close to the index and reduced the tracking difference.

Due to the exclusions and tilting mechanism within the fund, we would expect its performance to differ slightly from the broader emerging stock markets.

These markets are higher risk as they're at an earlier stage of development, so this fund should only be considered for a portfolio with a longer investment outlook that can accept periods of high volatility.

The fund has a relatively short track record, but Legal & General's team has a longer one managing a range of other tracker funds. Their size, experience and expertise running index tracker funds gives us confidence the fund will track its index tightly and efficiently over the long term, although there are no guarantees.

Investment Philosophy

Legal & General has become synonymous with passive funds and is one of the largest providers of index funds in the UK. It has around £482bn invested in this part of the business, allowing it to offer a wide range of index-tracking options. It has also built a team of experienced index tracker fund specialists.

We admire Legal & General's commitment to encouraging good corporate practices among the companies it invests in. It proactively engages with businesses and uses proxy voting rights to highlight important matters like environmental, social and governance (ESG) issues.

Legal & General's Future World range of funds incorporates its ‘Climate Impact Pledge’, which is its commitment to assess and engage with around 1,000 of the world’s largest companies on how well they manage the implications of climate change. Companies that consistently show a lack of awareness of climate change, and do not respond positively to engagement, are sold from the Future World funds.

Process and Portfolio Construction

This fund aims to track the performance of the Solactive Legal & General Enhanced ESG Emerging Markets Index. It's made up of around 1,700 companies spread across emerging markets including Taiwan, India and China. It also has an allocation to South Korea which isn’t part of all emerging market indices. The fund has a greater weighting to the technology and financial sectors.

It's not always possible to invest in every company in the Index and in the same proportion because it's difficult to buy and sell the smallest companies quickly or at low cost, which impacts performance. This is why the fund adopts a partial replication approach which helps it reduce costs while still closely matching the performance of the index.

The fund does still invest in some smaller companies which are usually subject to more extreme price movements, and this can increase risk.

The fund won't invest in direct violators of the UN Global Compact Principles (a UN pact on human rights, labour, the environment and anti-corruption) and companies that earn more than 10% of their revenues from tobacco. It also excludes companies that are involved in controversial weapons (such as cluster munitions, anti-personnel mines and chemical and biological weapons) and those that derive a significant amount of revenue from military and assault weapons.

The fund's exclusions include companies that earn more than 20% of their revenues from the mining and power generation of thermal coal and those involved in its expansion. It also excludes companies that derive more than 5% of their revenue from oil sands.

The index increases investments in companies that score well on a variety of ESG criteria - from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures.

The advantage of reducing investments in poorly-scoring companies, rather than selling their shares completely, is that the Legal & General team can engage with poorly-scoring companies to help them improve. An increased investment in exchange for improvement on various factors is a good incentive, so investors' money could make a positive difference.

The fund also adopts a decarbonisation pathway. This means it aims to reduce emissions by 50% relative to the unadjusted benchmark as at 2021 and thereafter achieve at least a 7% reduction in carbon emissions per year until 2050. The goal is to align the fund with the Paris Agreement, which aims to limit the temperature rise caused by global emissions to 1.5 degrees celsius above pre-industrial times. We think this is a positive step overall, but it increases the fund's complexity.

question mark Manager Track Record Based on HL Quantitative Research

This information is currently unavailable.

Fund Track Record

19/07/19 to 19/07/20 19/07/20 to 19/07/21 19/07/21 to 19/07/22 19/07/22 to 19/07/23 19/07/23 to 19/07/24
Annual return n/a n/a n/a -0.51% 7.09%

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Information about the fund

Fund manager biography

manager photo
Manager Name: LGIM Index Fund Management Team
Manager start date: 20 April 2022
Manager located in: London

The Index Fund Management Team comprises 25 fund managers, supported by two analysts. Management oversight is provided by the Global Head of Index Funds. The Team has average industry experience of 15 years, of which seven years has been at LGIM, and is focused on achieving the equally important objectives of close tracking and maximising returns

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used. Benchmark data provided subject to this disclaimer.
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account