LGIM’s Justin Onuekwusi on building a £1.5bn multi-asset range in three years

Justin Onuekwusi

Multi-asset funds have seen a surge in popularity since the introduction of the pension freedoms two years ago, but more recently market volatility has weighed on flows. But for Justin Onuekwusi, multi-asset fund manager at Legal & General Investment Management, the impact wasn’t too dramatic.

The Multi-Index fund range, which marked its third anniversary in August, has seen inflows of £1.5bn since launch in 2013 despite the recent challenging market environment.

Onuekwusi says: “Even in the darkest moments of last year when most fund managers saw outflows, we have seen inflows. Overall we went from zero three years ago to £1.5bn now.”

The Multi-index 5 fund, which sits in the middle of the five-strong range in terms of risk targeting, has been attracting most of the assets, and currently stands at around £500m.

Onuekwusi has shifted the fund’s focus to less risky assets over the past six months. He says: “We are cautious on risk assets now. We were more positive on risk assets months ago. This doesn’t mean these assets will fall but they’ll deliver lower returns in the medium term. We still think there’s growth in the world and the economy looks pretty good.”

To target a less risky approach, the fund has seen a reduction in its European equities exposure, which the team trimmed down to 7 per cent from 12 per cent. At the same time, the position on the euro has also decreased, and is now 5 per cent underweight, reflecting the influence populism and politics can have on asset classes, Onuekwusi says.

Around 80 per cent of the portfolio is invested in LGIM’s own funds, which LGIM says keeps its costs low; annual management charges for the range are 0.25 per cent. The rest of the fund invests in corporate and government bonds, cash, and UK commercial property.

Onuekwusi says he is now increasing the fund’s exposure to mid-risk assets, such as emerging markets hard currency sovereign debt. However, the outlook on emerging market equities remains a bear case for Onuekwusi, except for India. The manager expects China to go through an economic crisis within the next five years, for example.

He says: “We have less exposure to emerging market equities and low currency debt. We only have 3.5 per cent in emerging market equities, through the L&G Global EM Index fund.

“However, we’ve recently added an India index tracker, the Nifty 50, which makes the 15 per cent emerging market exposure, and we will continue to increase the position.”

Another recent add to the portfolio is the L&G UK 250 Index fund which accesses UK mid and small cap firms, rather than large caps. The holding makes up 2.5 per cent of the fund.

For exposure to the US, the portfolio holds LGIM’s Global Real Estate Securities fund which has 65 per cent in US commercial property securities.

Onuekwusi says: “2017 looks decent for growth even if the Federal Reserve hikes rates three times this year, growth will still be strong for the country.”

Onuekwusi joined LGIM in 2013, after a three-year stint working on Aviva Investors’ multi-asset range.

He manages the fund with Bruce White, Martin Dietz and Andrzej Pioch but the investment decisions are taken on a team basis, which is made up by 25 people at the firm.

Over the past three years, the Multi-Index 5 fund has returned 33.2 per cent versus the 26.8 per cent of the IA Mixed Investment 40%-80% Shares sector. It has slightly lagged the sector over one year at 17.8 per cent versus the sector’s 18.4 per cent, according to FE.