Legal & General Global Technology Index: December 2021 fund update

• Legal & General is one of the UK’s leading providers of passive funds
• An excellent option for investing in companies from more developed and advanced emerging markets that are engaged in information technology
• A low-cost way to invest into the FTSE World-Technology Index
• This fund does not currently feature 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 Global Technology Index fund invests in stocks from the FTSE World-Technology Index offering investors exposure to some of the biggest household names in software, computer services and technology. Due to its technology focus it’s highly concentrated in companies based in the US.

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 portfolio with little invested in the US or a lack of exposure to the technology sector.

Manager

Legal & General have been running index tracker funds longer than most. They’re also one of the largest providers of passive funds in the UK. That means they’ve got the resources and expertise to track indices as closely as possible, and the scale to keep charges to a minimum.

Tom Hammond manages the fund and has over 20 years of experience at Legal & General, with 16 of those within their index team. Each equity index fund at Legal & General has a primary (Hammond in this case) and secondary manager, who each have the ability to run the fund, along with the wider index team. The secondary manager for this fund is Tasos Kontos who joined Legal & General in 2010 after more than five years as Head of Index Design at the FTSE Group.

Process

The fund invests in every company in the FTSE World-Technology Index. It does this through full replication by investing in all the stocks in the index and in the same proportion. This helps the fund closely match the performance of the index.

The top ten holdings at the end of November accounted for 56.41% of the portfolio with Microsoft and Apple taking first and second place at 14.2% and 13.8% weightings respectively. The fund also has the flexibility to invest in higher risk emerging markets if they see fit.

In any index tracker fund, factors like withholding taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To keep the fund in line with the index the team will set tracking error targets, which measure how closely it's tracking its benchmark. These are monitored by Legal & General on a daily and monthly basis to ensure the fund is being run efficiently.

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

Culture

Legal & General have continued to develop their passive fund range over the years. They’ve got around £400bn invested in this part of their business, allowing them to offer a wide range of index-tracking options. They’ve 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 Russell 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 equity and risk departments across the business. We believe this provides support and adds challenge where appropriate.

Cost

The fund has an ongoing charge of 0.20%. We believe this is reasonable when compared with other technology tracker funds in this sector. Our platform charge of up to 0.45% per annum also applies.

Performance

The Legal & General Global Technology Index fund aims to track the FTSE World-Technology Index and has done so since its launch. Over the last 10 years it’s delivered a return of 747.29%, versus 779.04%* for the index. Past performance is not a guide to the future.

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. 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.

The fund has provided strong returns for its investors, particularly over recent years. This can be attributed to the growth of the technology companies included in the index. Many of the companies within the technology sector have benefited from the acceleration of existing trends as a result of forced changes to our lives from coronavirus.

While this is a global technology tracker fund, around 80% of the fund’s assets are invested in the US. This means it’s likely to be more responsive to economic and policy changes in the US than elsewhere in the future.

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.

A glance at the five-year performance table below shows that in some years the fund has tracked the index closer than others. Remember, past performance isn’t a guide to future returns.

Past performance is not a guide to the future. Source: *Lipper IM to 30/11/2021.

More on Legal & General Global Technology Index, including charges

Legal & General Global Technology Index key Investor Information