Understanding the complex world of legal and general funds is crucial for anyone considering investments in the financial markets. This comprehensive guide has been designed to provide you with essential insights and information on the different types of investment funds available in the market today. The article delves into various aspects of legal and general investment funds, including equity, public, and private funding options, as well as funds suitable for retirement planning. Additionally, you will gain an understanding of index funds, actively managed equity funds, fixed income funds, government-backed investment funds, hedge funds, and alternative investments. Not only will you discover the advantages and disadvantages of private funding, but you will also learn about pension fund investment strategies and taxation considerations for retirement funds. By navigating through this guide, you will be well-equipped to make informed decisions regarding your investments.
Understanding Legal and General Investment Funds
Legal and general funds refer to various investment options managed by Legal & General, a well-established global asset management company. These funds are created to suit a wide range of investor profiles, accommodating various investment goals and risk appetites. Understanding how these funds operate and what they have to offer is essential to make informed investment decisions.
Overview of Legal and General Funds
Legal & General offers a diverse range of funds, focusing on different asset classes and investment strategies. Their funds include index-tracking and actively managed funds, as well as specialized investment solutions.
Index-tracking funds aim to replicate the performance of a specific index, such as the FTSE 100 or S&P 500. These funds are passively managed, resulting in lower management costs for investors.
Actively managed funds are those where a fund manager makes investment decisions to maximize returns and achieve specific objectives based on thorough research and analysis.
For example, an actively managed fund could focus on global equities, with the fund manager selecting stocks from various countries and sectors to create a well-diversified portfolio.
In addition to traditional investment options, Legal & General also offers several sustainable funds, focusing on environmental, social, and governance (ESG) aspects. These funds strive to generate returns while promoting responsible investment practices and fostering a positive impact on society and the environment.
Types of Funds Available for Investment
Legal & General provides a broad range of fund types, designed to cater to different investor preferences and requirements. Some of the primary fund types include:
- Equity Funds
- Fixed Income Funds
- Multi-Asset Funds
- Property Funds
- Commodity Funds
- Specialist Funds
Equity Funds
Equity funds consist of portfolios that invest primarily in different companies' stocks. Legal & General offers a variety of equity fund options, such as:
| UK Equity Funds | Investing in UK-based companies' stocks |
| Global Equity Funds | Focusing on stocks of companies from across the world |
| Emerging Market Equity Funds | Targeting stocks from emerging markets like the EMEA region and Asia Pacific |
| Sector-Specific Equity Funds | Investing in companies within specific sectors, e.g., technology, healthcare, or finance |
Fixed Income Funds
Fixed income funds invest in various interest-bearing securities, such as government and corporate bonds. These funds generally offer lower risk and more predictable income streams compared to equity funds. Some common types of fixed income funds provided by Legal & General include:
- Government Bond Funds
- Corporate Bond Funds
- Global Bond Funds
- Emerging Market Bond Funds
Multi-Asset Funds
Multi-asset funds are designed to offer diversification by investing in a mix of asset classes, including equities, fixed income, and commodities. The main types of multi-asset funds offered by Legal & General are:
- Income-focused Multi-Asset Funds
- Growth-focused Multi-Asset Funds
- Balanced Multi-Asset Funds
Property Funds
Property funds provide exposure to the real estate market through investment in commercial and residential properties, as well as property-related securities. Legal & General offers both direct property funds and property securities funds for investors seeking a diversified approach to property investment.
Commodity Funds
Commodity funds invest in physical commodities and commodity-related securities, such as stocks of companies involved in the extraction, production, and distribution of natural resources. Legal & General offers commodity funds that provide exposure to various commodities such as precious metals, agriculture, and energy through their investments in commodity indices.
Specialist Funds
Specialist funds are tailored to focus on specific market segments or investment strategies. They may include funds targeting technology, healthcare, infrastructure, or ESG-focused investments. These funds can offer unique opportunities for investors seeking exposure to particular sectors or niches within the market.
Legal and General Equity Funds
Equity funds form a significant part of Legal and General's investment offerings, catering to various investor profiles and preferences. Boasting a wide range of options, the funds can be either index-tracking or actively managed, allowing investors to choose according to their strategy and appetite for risk. In this section, we delve deeper into index funds and actively managed equity funds, exploring their features, benefits, and potential drawbacks.
Legal and General Index Funds
Legal and General offers a range of index funds, providing cost-effective and diversified investment options that seek to replicate the performance of a specific market index. Index funds are passively managed, requiring less active decision-making by the fund manager, which, in turn, translates to lower management fees and expenses for the investors. Some of the key characteristics of these funds include:
- Cost Efficiency: Due to the passive management approach, index funds generally have lower expense ratios and transaction costs compared to actively managed funds.
- Diversification: By tracking a broad market index, index funds offer instant diversification across various sectors, companies, and regions, thereby reducing investment risk.
- Transparency: Investors can easily understand the investment strategy and holdings of index funds, as they closely mirror a specific market index.
- Tax Efficiency: Index funds generally generate fewer taxable events due to low portfolio turnover, translating into better tax efficiency for investors.
Nevertheless, there are some potential downsides to investing in index funds to consider:
- Limited Outperformance Potential: Since index funds only track a market benchmark, they may not outperform the market or generate alpha, which actively managed funds strive to achieve.
- Market Capitalisation Bias: Some index funds may be subject to market capitalisation bias, overweighting larger companies in the market, which could impact performance during certain market conditions.
Legal and General offers various index funds, targeting different market indices, such as:
| FTSE 100 Index | Tracks the performance of the 100 largest UK companies by market capitalisation |
| FTSE All-Share Index | Covers around 600 UK companies, representing approximately 98% of the UK market capitalisation |
| S&P 500 Index | Represents the performance of the 500 largest US companies by market capitalisation |
| MSCI World Index | Aims to capture the performance of large and mid-cap equities across 23 developed markets |
| MSCI Emerging Markets Index | Offers exposure to large and mid-cap equities across 26 emerging market countries |
Actively Managed Equity Funds
Legal and General also provides a selection of actively managed equity funds, where a fund manager makes investment decisions based on thorough research and analysis. In contrast to index funds, actively managed funds aim to outperform the market or achieve specific investment objectives, rather than merely tracking a market index. The core features of actively managed equity funds include:
- Active Decision-making: Fund managers have the flexibility to select and allocate investments according to their analysis, outlook, and expertise, in contrast to the rigid, predetermined structure of index-tracking funds.
- Alpha Generation: Through skilled stock selection and portfolio management, actively managed funds seek to generate alpha, or excess returns over a specific benchmark.
Nonetheless, there are potential downsides to consider when investing in actively managed equity funds:
- Higher Costs: Actively managed funds entail higher management fees and transaction costs, due to their trading activities and research requirements.
- Manager Risk: The performance of an actively managed fund relies heavily on the skills and expertise of the fund manager, which may not always align with investors' expectations or preferences.
Legal and General's actively managed equity funds cater to a diverse range of investor preferences, with offerings that focus on specific sectors, geographies, and investment styles such as growth, value, or income. Some examples of Legal and General's actively managed equity fund offerings are:
| UK Select Growth Fund | Aims to generate long-term capital growth by investing in UK companies that exhibit high growth potential |
| Global Equity Diversified Fund | Seeks to provide long-term capital growth by investing in a diversified portfolio of global equities |
| European Equity Growth Fund | Targets capital growth by investing in stocks of European companies with a potential for significant growth over the long term |
| Health Innovation Fund | Focuses on companies in the healthcare sector that are innovating, improving patient outcomes, and addressing unmet medical needs |
| Climate Impact Global Equity Fund | Invests in companies operating in sectors that are critical to the transition to a low-carbon and climate-resilient economy |
In conclusion, whether an investor opts for index funds or actively managed equity funds depends on factors such as cost considerations, risk appetite, and personal investment objectives. By understanding the distinctions and features of both types of funds, investors can make informed decisions that align with their financial goals and preferences.
Public Funding Options
Public funding options are essential sources of capital for businesses, projects, and social initiatives, playing a crucial role in fostering innovation, economic growth, and social development. In this regard, understanding the various aspects of public funding options, such as Legal and General fixed income funds and government-backed investment funds, can help investors make better decisions and contribute to their financial well-being and the broader economy.
Legal and General Fixed Income Funds
Legal and General Fixed Income Funds offer investors exposure to debt securities in the fixed-income market, targeting regular income and capital preservation. By investing primarily in government and corporate bonds, these funds provide investment options that typically carry lower risk compared to equity funds. Undeniably, fixed income funds play an indispensable role in a well-balanced investment portfolio. Main types of fixed income funds offered by Legal and General include government bond funds, corporate bond funds, global bond funds, and emerging market bond funds.
Government bond funds invest primarily in fixed income securities issued by governments, such as treasury bills, notes, and bonds. These instruments are generally considered low-risk investments, as they are backed by the credit and the full faith of the issuing government.
Corporate bond funds allocate their assets to debt securities issued by private corporations. While corporate bonds generally offer higher yields than government bonds, they also come with higher degrees of credit risk and interest rate risk.
Some key features of fixed income funds include:
- Income Generation: Fixed income funds primarily aim to generate regular income streams for investors through periodic interest payments.
- Diversification: By investing in a broad universe of government and corporate bonds, fixed income funds offer diversification opportunities that can help mitigate portfolio risk.
- Capital Preservation: Fixed income securities typically have lower volatility and risk levels compared to equities, allowing for capital preservation in a well-constructed investment portfolio.
- Interest Rate Sensitivity: The prices of fixed income securities are inversely related to interest rate movements. Investors should pay attention to interest rate risk when selecting fixed income funds.
- Credit Quality: The credit ratings of the bonds in the fund's portfolio reflect the issuers' creditworthiness. High-quality bonds typically offer lower yields but are less risky than bonds with lower ratings.
Examples of fixed income funds offered by Legal and General include:
| Legal & General All Stocks Index-Linked Gilt Index Fund | Invests in index-linked UK government bonds with varying maturities |
| Legal & General Corporate Bond Fund | Seeks to provide income and capital growth through investment in high-quality corporate bonds |
| Legal & General Global Inflation-Linked Bond Fund | Targets inflation protection by investing in a diversified portfolio of global inflation-linked bonds |
| Legal & General Emerging Market Government Bond Fund | Aims to provide income by investing in debt instruments issued by governments of emerging market countries |
Government Backed Investment Funds
Government-backed investment funds are financial instruments or investment vehicles established and supported by national governments or government entities. These funds aim to stimulate economic growth, encourage innovation, and support various industries and social initiatives. Some of the primary forms of government-backed investment funds include development finance institutions, sovereign wealth funds, venture capital funds, and public pension funds.
A development finance institution (DFI) is a public or quasi-public entity that provides financing to projects and businesses to promote economic development and job creation, primarily in developing countries. DFIs often support projects that would not have attracted private funding due to their risk profiles or long investment horizons.
Sovereign wealth funds (SWFs) are state-owned investment funds that invest in a range of asset classes, such as equities, fixed income, real estate, and alternative investments. SWFs are typically funded by revenues from natural resources, foreign exchange reserves, or budget surpluses.
Some characteristics of government-backed investment funds include:
- Public Policy Objectives: Government-backed funds aim to promote public policy objectives, such as job creation, economic development, innovation, social impact, and financial inclusion.
- Long-Term Focus: Government-backed funds often adopt a long-term investment horizon and are less concerned with short-term market fluctuations compared to private investment funds.
- Co-Investment Opportunities: By investing alongside private investors, government-backed funds can catalyse additional private investment and mitigate risk for private sector participants.
- Risk-Taking: Government-backed funds may invest in early-stage companies or projects that carry higher risks, as they have the mandate and resources to support high-risk, high-impact investments.
Examples of government-backed investment funds in the UK and across the globe include:
| British Business Bank | A government-owned development bank that supports and finances UK-based small and medium-sized enterprises through loans, guarantees, and equity investments |
| European Investment Bank (EIB) | A European Union institution that provides financing for infrastructure projects, small and medium-sized enterprises, and research and development initiatives in EU countries |
| Norway Government Pension Fund Global | The world's largest sovereign wealth fund, funded by Norway's oil revenues, investing in a diversified portfolio of global equities, fixed income securities, and real estate |
| Public Investment Fund (PIF) of Saudi Arabia | A sovereign wealth fund that invests in various asset classes, sectors, and regions to help diversify Saudi Arabia's economy beyond oil exports |
Recognising the benefits offered by Legal and General fixed income funds and government-backed investment funds, as well as understanding their implications for individual investors and economies at large, is crucial for making informed investment decisions and contributing to sustainable economic growth.
Private Funding Choices
Private funding options offer investors a wide range of opportunities to invest in assets other than traditional investments like stocks, bonds, and mutual funds. Such choices include hedge funds, private equity, venture capital, real estate, and other alternative investments. While these choices often involve higher risks and require more significant initial capital, they provide investors with additional means of diversification and the potential for higher returns. Let us delve into some of the popular private funding choices and their associated advantages and disadvantages.
Hedge Funds and Alternative Investments
Hedge funds are private investment funds that typically use advanced investment strategies and employ leverage to generate high returns. Alternative investments, on the other hand, refer to assets that fall outside the conventional categories of stocks, bonds, and cash. Some examples of alternative investments are:
- Private Equity
- Venture Capital
- Real Estate Investment Trusts (REITs)
- Commodities
- Art and Collectibles
- Structured Products
These investments are typically less regulated than traditional investments and are often available only to sophisticated or accredited investors. Characteristics of hedge funds and alternative investments include:
- High Minimum Investment: Investment in hedge funds and alternative investments generally requires a substantial initial capital outlay, limiting their accessibility to wealthy individuals and institutional investors.
- Limited Liquidity: Due to lock-up periods or extended investment horizons, hedge funds and alternative investments may not be as easily converted to cash as traditional investments, implying limited liquidity.
- Diversification: Hedge funds and alternative investments offer diversification benefits for investors seeking exposure beyond traditional markets or those looking to lower their portfolio's correlation to the broader market.
- Higher Return Potential: Investors in hedge funds and alternative investments may anticipate higher returns through the funds' active trading strategies and expertise in niche markets. Nevertheless, this potential comes with increased risks.
- Manager Expertise: Hedge fund and alternative investment managers typically possess industry-specific experience and knowledge, aiming to leverage their expertise to deliver superior results. However, some managers may be less skilled or have inconsistent track records, carrying manager-specific risk.
An example of a private equity investment could be an investor buying a significant stake in a privately-held company, intending to grow and improve the business over time before selling the stake at a higher valuation.
Pros and Cons of Private Funding
There are both advantages and disadvantages associated with private funding choices. It is crucial for investors to consider these factors as they relate to their own investment objectives, risk tolerance, and time horizons.
Pros of private funding options include:
- Diversification: Private funding choices can help diversify portfolios by reducing correlation with traditional market investments, potentially enhancing risk-adjusted returns over time.
- Higher Return Potential: Due to their unique investment strategies, hedge funds and alternative investments may offer higher potential returns compared to conventional asset classes.
- Less Susceptibility to Market Fluctuations: Some alternative investments, such as real estate, can provide a natural hedge against inflation and economic downturns, making them less susceptible to general market fluctuations.
- Access to Niche Markets: Private funding choices can offer exposure to unique or niche markets that might be difficult for many investors to access through traditional investments.
Cons of private funding options include:
- Limited Liquidity: As they often have longer investment horizons or feature lock-up periods, private funding choices can come with limited liquidity, making them less appealing for investors in need of ready access to capital.
- Higher Risk and Volatility: Some private funding alternatives, like venture capital or hedge funds, may have higher risks and volatility due to their underlying investment strategies or asset composition.
- High Minimum Investment: The high minimum capital requirements associated with private funding options could exclude many individual investors from participation in these alternative investments.
- Regulatory and Transparency Issues: Hedge funds and alternative investments are generally subject to fewer regulations than traditional investments, which could result in lower transparency and increased risks for investors.
In conclusion, private funding choices like hedge funds and alternative investments can provide investors with unique opportunities for diversification and potentially higher returns. However, these opportunities come with increased risks, limited liquidity, and regulatory challenges. Therefore, it is vital for investors to carefully assess their risk tolerance, investment objectives, and access to capital before considering private funding options.
Legal and General Funds for Retirement
Legal and General offers a range of investment funds suitable for retirement planning. These funds are designed to meet the unique requirements of individuals preparing for retirement, taking into account their age, risk tolerance, and financial goals. By focusing on diversified investment strategies, tax-efficient growth, and income generation, Legal and General funds can help ensure a comfortable retirement for investors.
Pension Fund Investment Strategies
Pension fund investment strategies are tailored to balance growth potential with risk management, aiming to build a diversified and growth-oriented portfolio over the long term. Investors need to make informed decisions based on various factors, such as their investment time horizon, risk appetite, and projected retirement goals. Some common investment strategies for pension funds include:
- Life-Stage Investing
- Target-Date Funds
- Multi-Asset Funds
- Income-Focused Investments
Life-Stage Investing
Life-stage investing is an investment approach that dynamically allocates assets based on an individual's age and risk tolerance throughout their life. This strategy generally has higher exposure to equities at a younger age, gradually shifting towards fixed income investments and other conservative assets as retirement approaches. Key aspects of life-stage investing include:
- Dynamic Asset Allocation: As age and risk tolerance change, the mix of equities, fixed income, and other assets are adjusted over time to reflect an investor's updated needs and goals.
- Risk Management: By reallocating assets towards more conservative investments as retirement approaches, life-stage investing aims to minimize the impact of market fluctuations on the retirement portfolio.
- Long-Term Focus: Life-stage investing emphasizes a long-term perspective, leveraging the benefits of compound interest and avoiding the temptation to time the market.
Target-Date Funds
Target-date funds are designed to simplify retirement investing by automatically adjusting the portfolio's asset allocation as the investors approach their target retirement date. The main characteristics of target-date funds include:
- Automatic Portfolio Adjustment: Target-date funds gradually shift the asset allocation from a higher stock proportion to a higher bond and cash proportion as the retirement date approaches, reducing risk and volatility.
- Diversification: These funds invest in a diverse mix of assets, offering investors a one-stop solution for retirement planning and diversification.
- Accessibility: Target-date funds are easy to understand and accessible to most investors, requiring minimal investment knowledge and involvement.
Multi-Asset Funds
Multi-asset funds invest in a variety of asset classes, including equities, bonds, cash, and alternative investments, seeking growth and income diversification. The main benefits of multi-asset funds for retirement investing include:
- Asset Allocation: These funds provide optimal asset allocation based on market conditions, investment objectives, and risk tolerance, ensuring a well-rounded retirement portfolio.
- Income Generation: By investing in multiple income-producing assets, multi-asset funds can generate a steady income stream for retirement.
- Risk Management: Diversification across asset classes helps manage and mitigate risk, cushioning the portfolio against economic downturns and market fluctuations.
Income-Focused Investments
Income-focused investments aim to generate a regular income stream for investors in retirement, prioritizing dividend and interest-paying assets. Examples include:
- Fixed Income Funds: Investing in debt securities, such as government and corporate bonds.
- Equity Income Funds: Allocating assets to dividend-paying stocks.
- Real Estate Investment Trusts (REITs): Investing in income-producing properties and real estate securities.
Income-focused investments contribute to a stable income source during retirement, minimizing the need for capital withdrawals from the principal amount. However, investors should carefully assess the balance between income and growth potential before allocating a significant portion of their retirement portfolio to these investments.
Taxation Considerations for Retirement Funds
Tax efficiency in retirement planning is crucial to optimize long-term gains and minimize tax liabilities. Understanding the tax implications associated with various investment options can help investors make informed decisions to maximize their retirement savings. Some key taxation aspects to consider include:
- Pension Contributions: Contributions made to pension funds may be eligible for tax relief, subject to certain annual and lifetime limits.
- Pension Withdrawals: The manner in which withdrawals from pension funds are taxed depends on the type of pension scheme and the investor's age. For instance, investors can typically withdraw 25% of their pension tax-free upon reaching the age of 55, with the remaining withdrawals taxed as income at the investor's marginal tax rate.
- Capital Gains Tax: Taxation on investment gains depends on the investment vehicle and holding period. Capital gains from investments held within an Individual Savings Account (ISA) or pension fund are generally tax-exempt, while gains from investments held outside these vehicles may be subject to capital gains tax, subject to an annual allowance.
- Dividend Income Tax: Dividend income generated from investments held within pension funds or ISAs is usually tax-free. When held outside these tax-advantaged accounts, dividend income is subject to taxation, with rates depending on the investor's total income and tax bracket. However, there is a tax-free dividend allowance available for all investors.
- Interest Income Tax: Similar to dividend income, interest income earned within pension funds or ISAs is generally tax-free, while interest earned outside these vehicles is subject to taxation. Interest income is taxed at the investor's marginal tax rate, but a personal savings allowance applies, offering a certain amount of tax-free interest income per year.
In conclusion, understanding the different investment strategies and taxation considerations associated with Legal and General funds for retirement planning can help investors build robust and tax-efficient portfolios to secure their financial future.
Legal and general funds - Key takeaways
Legal and general funds: Investment options managed by Legal & General, a global asset management company, including equity, public, and private funding options.
Understanding Legal and General Investment Funds: Essential for making informed investment decisions, offering diverse investment strategies and various fund types (equity, fixed income, multi-asset, etc.).
Public funding: Key source of capital for business growth and social development, including fixed income funds and government-backed investment funds.
Private funding: Offers investment opportunities beyond traditional assets like stocks and bonds, including hedge funds, private equity, and alternative investments.
Legal and General Funds for Retirement: Range of investment funds designed to meet retirement planning needs, including pension fund investment strategies and tax considerations.
Explanations 
Exams 
Magazine 
