CAF UK Equitrack Fund

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CAF UK Equitrack Fund

  1. 1. Legal & General Investment Management CAF UK Equitrack Fund 20 May 2008 John Tickle - Head of Institutional Investment
  2. 2. CAF UK Equitrack Fund <ul><li>A UK Equity Index Common Investment Fund designed to capture the return of the FTSE All Share Index </li></ul><ul><li>Managed by LGIM’s successful index team who look after £200bn </li></ul><ul><li>Trustee: Royal Bank of Scotland </li></ul><ul><li>Operator: L&G(UTM) Ltd </li></ul><ul><li>Launched 7 Feb. 2005 </li></ul><ul><li>Current size £198m </li></ul><ul><li>Underlying yield 3.60% </li></ul>
  3. 3. Index Fund Characteristics <ul><li>Lower Risk </li></ul><ul><ul><li>Eliminate stock selection risk </li></ul></ul><ul><ul><li>Match index return within tight tolerances </li></ul></ul><ul><li>Lower Cost </li></ul><ul><li>Performance </li></ul>
  4. 4. Investment Risks Number of Stocks Risk Market Risk Stock Specific Risk Index Funds avoid stock specific risk 0 100
  5. 5. Index Fund Characteristics <ul><li>Lower Risk </li></ul><ul><li>Lower Cost </li></ul><ul><ul><li>Low turnover </li></ul></ul><ul><ul><li>Low fees </li></ul></ul><ul><ul><li>Low restructuring costs </li></ul></ul><ul><li>Performance </li></ul>
  6. 6. Index Fund Characteristics <ul><li>Lower Risk </li></ul><ul><li>Lower Cost </li></ul><ul><li>Performance </li></ul><ul><ul><li>Consistent market returns </li></ul></ul><ul><ul><li>Accurate tracking </li></ul></ul>
  7. 7. Our Trading Strategy <ul><li>Low cost objective - including market impact </li></ul><ul><li>Crossing - internal/external through crossing networks </li></ul><ul><li>Phasing strategy for new issues based on stock liquidity </li></ul><ul><li>Concentrate transactions at points of greatest liquidity </li></ul><ul><li>Index constituent changes are a major focus </li></ul>
  8. 8. Index Changes <ul><li>Additions / deletions </li></ul><ul><li>Free float changes </li></ul><ul><li>Alterations in share capital </li></ul><ul><li>Rights issues </li></ul>
  9. 9. FTSE All Share Index Structure Source FTSE at 30.04.08 3.60 100.00 664 Total 2.73 2.81 314 Small Cap 3.03 12.44 250 Mid Cap 3.71 84.75 100 Large Cap Yield % % Index Constituents
  10. 10. Investment Returns Compared from February 2005 to date
  11. 11. Investment Returns Compared from 30 April 2007 to date
  12. 12. Performance by Capitalisation from 30 April 2007 to date
  13. 13. UK Equity Sector returns Year to 30 April 2007 Source :LGIM / FTSE -4.31 Year to 30 April 2008 -18.85 Technology -19.80 Financials -2.31 Utilities 4.63 Telecommunications -23.90 Consumer Services -18.10 Healthcare -1.81 Consumer Goods -12.64 Industrials 50.66 Basic Materials 23.92 Oil & Gas Return % Sector
  14. 14. CAF UK Equitrack Fund Tracking results to 30 April 2008 Source: LGIM Total return data before expenses based on closing monthly values to 30 April 2008 0.06 0.05 Tracking Deviation 10.58 -4.32 FTSE All Share Index 10.64 -4.27 CAF UK Equitrack Fund Since Inception % pa Last 12 Months %
  15. 15. Price Performance Source: Morningstar Workstation, bid to bid prices, net reinvested income to 30 April 2008 37.07 2005/6 % 14.18 -4.39 13.56 CAF UK Equitrack Fund Three Years % pa 2007/8 % 2006/7 %
  16. 16. How the CAF Equitrack Fund can help your charity <ul><li>Captures the market return efficiently </li></ul><ul><li>A unitised alternative to a segregated portfolio </li></ul><ul><ul><li>Zero cost objective for transfers </li></ul></ul><ul><li>An ideal core investment </li></ul><ul><li>Very low fees </li></ul>
  17. 17. UK Equity Market <ul><li>The UK economy is deteriorating as looser monetary policy is not being passed onto consumers. </li></ul><ul><li>Domestic profits may be under pressure form inflation and high interest rates. </li></ul>Sterling’s value
  18. 18. UK Equity Market <ul><li>Attractive valuations relative to gilts </li></ul><ul><li>Resources exposure should benefit if Asian growth holds up </li></ul><ul><li>Vulnerable to rising risk aversion </li></ul><ul><li>Domestic recession, falling house prices and rising import costs to hurt earnings </li></ul>UK Gilt-Equity earnings yield ratio
  19. 19. External assets = 78% LGIM Funds Under Management Source: LGIM 31 st March 2008 internal data 282.25 82.35 199.90 Total 5.44 0.15 14.04 8.61 110.36 62.40 81.24 Total £bn 4.60 0.84 Cash 0.15 n/a Ventures 14.04 n/a Structured Solutions 8.61 n/a Property 45.84 64.52 Bonds 3.51 58.89 Overseas Equities 5.59 75.65 UK Equities Active £bn Index £bn
  20. 20. Legal & General Investment Management does not provide advice on the suitability of its products or services. Authorised and Regulated by the Financial Services Authority The ultimate holding company of Legal & General Investment Management Limited is Legal & General Group Plc Registered Office: One Coleman Street London EC2R 5AA Registered in England No.2091894 The FTSE UK, FTSE All-World ™ and FTSE4Good ™ index series are calculated by FTSE International Limited (“FTSE”). FTSE does not sponsor, endorse or promote these funds. The FTSE Global Bond index series is operated by FTSE International Limited in conjunction with Reuters, the Institute of Actuaries and the Faculty of Actuaries. FTSE, Reuters, the Institute of Actuaries and the Faculty of Actuaries accept no liability in connection with the trading of any products on these indices. All copyright in the indices’ values and constituent lists belong to FTSE. Legal & General Investment Management Ltd has obtained full licence from FTSE to use such copyright in the creation of this product.. “” FTSE ™” , “FT-SE ® ” and “Footsie ® ” are trade marks of the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited (“FTSE”) under licence. “All-Share, “All-World” and “FTSE4Good ™ “ are trade marks of FTSE.” Past performance is not necessarily a guide to the future and the value of investments can fall as well as rise. Investment in overseas equity and bond funds may involve exposure to a currency other than Sterling. Investors are warned that changes in the rate of exchange prevailing at any given time may cause the value of investments in those funds to go down as well as up. A brochure describing our range of units trusts is available on request.

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