Legal & General European Index: December 2025 fund update

• Legal & General is one of the UK’s leading providers of passive funds

• We think this fund is an excellent option for accessing a broad range of European stock markets

• It’s a simple, low-cost way of tracking the performance of the FTSE World Europe ex UK Index

• This fund currently 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 European Index fund invests in large and medium-sized companies across Europe, excluding the UK. Europe is home to successful businesses that make money domestically, as well as across the globe, which means their prospects aren't always reliant on Europe's economy.

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 an investment portfolio aiming to deliver long-term growth. It could be a good addition to a global portfolio or could diversify a portfolio already focused on areas such as the US or Asia.

Manager

Legal & General has managed index tracker funds for over 30 years and is one of the largest providers of index funds 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, Tom Hammond is the primary manager of this fund. Hammond joined Legal & General in 2000 and has been on the index team for two decades. The secondary manager for this fund is Sacha Mirza. He previously worked as a fund manager at UBS before joining Legal & General in 2013.

Process

This fund tracks the performance of the broader European stock market, as measured by the FTSE World Europe ex UK Index. It aims to invest in every company in the index and in the same proportion. This is known as full replication and helps the fund closely match the performance of the index.

The fund is currently made up of 546 companies in sectors like financials, industrials and healthcare. France, Germany and Switzerland make up a large part of the index, accounting for 20.4%, 18.7% and 18.0% respectively, while the UK is excluded.

In any index tracker fund, factors like withholding taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. The team try to keep the fund’s turnover, the frequency at which shares are bought and sold, as low as possible to reduce some of these costs.

Legal & General cross trades shares internally across its own funds when there’s an index rebalance. Trading efficiently like this helps to minimise costs and reduce the tracking difference between the fund and the index.

Culture

Legal & General has developed its passive fund range over the last three decades. The company manages around £510bn in tracker funds, allowing it to offer a wide range of index-tracking options.

Legal & General has built a team of experienced passive fund specialists and is innovative too. If an index doesn’t exist for a sector the team would like to track, they’ll often work with index providers to create one so they can track it.

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

Employees are also encouraged to participate in Legal & General’s sharesave scheme which should encourage them to be more engaged with the growth of the company. In addition, a portion of fund managers’ bonuses are invested into the funds they manage. By doing this, their interests are further aligned with the investors in the fund.

ESG Integration

Legal & General Investment Management (LGIM) is predominantly a passive investor, but we are impressed with the extent to which they’ve woven Environmental, Social and Governance (ESG) into its culture. Being a mostly passive fund house hasn’t stopped them being innovative when it comes to ESG. In May 2019, the firm launched its ‘Future World’ range of funds, which invest more in companies that score well on a range of ESG criteria, though the European Index fund isn’t part of that range.

In 2019, LGIM established its Global Research and Engagement Groups, which bring together representatives from the investment and stewardship teams, in order to unify their engagement efforts. Engagement is conducted in line with the firm’s comprehensive engagement policy. A detailed description of the firm’s engagement and voting activity (including case studies) is available in its annual Active Ownership report.

LGIM’s Stewardship team is responsible for exercising voting rights globally, both for LGIM’s active and index funds. Voting decisions are publicly available through a tool which allows a user to search for any company to find out how LGIM voted, and a detailed rationale is provided for votes against management and abstentions.

Legal & General European Index is a passive fund designed to track an index that doesn’t specifically integrate ESG analysis or exclude companies in certain industries, like tobacco or energy.

Cost

The fund has an annual ongoing fund charge of 0.12%, but a discount of 0.06% is available for HL investors, which reduces the charge to 0.06%. Our platform charge of up to 0.45% per annum also applies, except in the Junior ISA where no platform charge applies.

Performance

The Legal & General European Index fund has done a good job of tracking the FTSE World Europe ex UK Index. Over the last 10 years, the fund has returned 157.67%* versus 160.72% for the index. As expected from an index tracker fund, it’s fallen behind the benchmark over the long term because of the costs involved in running the fund. However, the tools used by the managers have helped to keep performance close to the index.

Over the past 12 months, the fund gained 23.66% compared to 23.57% for the index. Remember, past performance isn’t a guide to future returns.

The performance of different European markets has been mixed though. Germany’s stock market performed well and contributed the most to the fund’s performance over the year. The government’s announcement of a fiscal stimulus package boosted the market, while aerospace & defence companies like Rheinmetall have benefited from increased defence spending.

Despite ongoing political uncertainty, France’s stock market also performed well and was a positive contributor to overall returns. This reflects the global nature of French companies which make most of their revenues internationally and are therefore less dependent on the domestic economy.

Denmark was the weakest major European market. This was mainly due to a sharp fall in Novo Nordisk’s share price following downgraded growth forecasts, disappointing clinical trial outcomes and rising competition from US rival Eli Lilly. Novo Nordisk, best known for its weight loss drugs, makes up just over 40% of Denmark’s stock market, which means it has a significant impact on the performance of the broader market.

Given Legal & General’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index closely in the future, though there are no guarantees.