Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Legal & General, one of Europe’s largest asset managers, is merging two investment units and culling about 70 roles as part of a broader restructuring to cut costs and refocus the business on higher-profit markets.
The FTSE 100 company, which runs £1.1tn in assets, is merging its £500bn index funds unit with its £12bn ETF division to create a more global team, according to two people familiar with the plans.
As part of the merger, L&G’s London-based global head of Index and ETFs Howie Li is leaving the company, while the newly combined division will be led by L&G’s head of equity solutions David Barron in Chicago, one of the people said.
L&G said Barron’s appointment “reflects our continued commitment to building a globally unified investment team and platform, leveraging our strengths across regions”.
Li did not immediately respond to a request seeking comment made via LinkedIn.
The merger comes as L&G is attempting to increase scale in certain markets that it believes are poised for growth, such as private assets, while cutting roles to keep costs in check.
L&G, which is one of the largest players in the UK’s index fund market, brought in Eric Adler to lead its asset management business and oversee an expansion into private markets.
William Hawkins, analyst at KBW, said that although L&G was “a top-class provider of indexed funds in the UK”, the challenge is that these margins are “thin” while competition for scale and technology is “intense”.
“The index fund orientation leaves L&G’s asset management business with a thin gross revenue margin and wafer-thin profit margin,” he added.
L&G agreed to acquire Proprium Capital Partners, a $3.5bn global real estate private equity group, the Financial Times revealed this month. The purchase helped to expand L&G’s geographical presence across Europe and Asia.
L&G’s group chief executive António Simões restructured the company last year to increase the fund division’s private markets assets from about £50bn to £85bn by 2028. Shares in L&G are down about 2 per cent over the past year.
More traditional asset managers are seeking to offer private assets to their customers, as these products come with the potential to earn higher fees than public market funds, but expose clients to new risks.
KBW’s Hawkins said that “growing in private asset classes is a common strategy for most asset managers globally, so competition for talent and technology is intense”.
As a result of the broader restructuring, L&G is consulting on axing about 70 roles across the asset management division, according to the two people familiar with the situation.
L&G confirmed that it was “making some changes to teams in our asset management business, reflecting our strategic focus and addressing areas of duplication”.
The latest round of job cuts comes after a number of roles were axed at the end of last year.
This article has been amended since publication to reflect the number of jobs L&G is consulting on cutting
