L&G Absolute Return Bond Fund
Share Class I GBP Accumulation - ISIN: LU1000844222
The Fund is a sub-fund of Legal & General SICAV. Management company: LGIM Managers (Europe) Limited, part of the Legal & General group
Objectives and investment policyEdit
The objective of the Fund is to provide a combination of growth and income above those of the ICE BofA SONIA 3-Month Constant Maturity Total Return Index[1], the "Benchmark Index". The Fund is actively managed and aims to outperform the Benchmark Index by 1.5% per annum. This objective is before the deduction of any charges and measured over rolling three year periods.
The Fund aims to deliver this objective while decarbonising the portfolio over time, targeting a 50% reduction in weighted average carbon intensity by 2030, compared to a December 2019 baseline level.
The Fund aims to generate positive returns in all market conditions. There can be no assurance that the Fund will achieve its investment objective.
The Manager has broad discretion over the composition of the Fund’s portfolio.
The Fund will invest predominantly in fixed income securities. These include bonds and other debt instruments, issued in a variety of currencies by companies and governments from around the world.
In addition to decreasing the weighted average carbon intensity over time, the Fund promotes a range of environmental and social characteristics by:
- Excluding investments in bonds issued by companies in the LGIM Future World Protection List ("FWPL").
- Excluding companies from the Fund which do not meet the Manager’s “Climate Impact Pledge”, in order to encourage strong governance and sustainable strategies.
The Fund will invest primarily in debt rated by a recognised rating agency as investment grade (rated as lower risk). It may also invest in debt rated as sub-investment grade (rated as higher risk). The Fund may also invest in unrated bonds which have not been rated by a credit rating agency.
The Fund may also invest in other transferable securities, including but not limited to, depository receipts, permitted deposits, money market instruments, cash, near cash and units in collective investment schemes.
The absolute return philosophy is focused on capital preservation and minimising falls in value. In order to achieve consistent positive returns, significant emphasis is placed on risk management and avoiding downside scenarios.
The Fund will use derivatives extensively for investment purposes or to reduce risk or cost or to generate additional growth. Derivatives are financial instruments whose values are based upon the price of one or more other asset(s). Usage of derivatives is monitored to ensure that the Fund is not exposed to excessive or unintended risks.
The financial derivative instruments that the Fund may invest in include the following: Spot and Forwards contracts[2], Credit Default Swaps[3] and Exchange Traded Futures[4]. The Fund may enter into repurchase agreement and reverse repurchase agreement transactions which consist of the purchase and sale of securities whereby the seller has the obligation to repurchase from the acquirer.
Some investments held by the Fund may be issued in currencies other than sterling. The Fund may use a technique known as currency hedging to seek to protect against exchange rate movements between other currencies and Pounds Sterling.
The Fund may invest up to 20% of its assets in asset-backed securities (ABS)[5] and mortgage-backed securities (MBS)[6]. The Fund may invest up to 20% of its assets in contingent convertible debt securities.
Other information:Edit
The Fund is actively managed as the Manager uses their expertise to select investments to achieve the Fund’s objectives.
The Fund promotes a range of environmental and social characteristics. Further information on how such characteristics are met by the Fund can be found in the Supplement.
Your shares will be accumulation shares. Income from the Fund’s investments will be reinvested back into the value of your shares.
This Fund is designed for investors looking for income or growth from an investment in fixed income securities.
Although investors can take their money out at any time, this Fund may not be appropriate for those who plan to withdraw their money within five years.
This Fund is not designed for investors who cannot afford more than a minimal loss of their investment.
If you do not understand this document we recommend you seek additional information to help you decide if this Fund is right for you.
Shares can be bought, sold or switched on any business day. Orders received by 2.00pm (CET) will be processed as at the valuation point on the same business day. Orders received after 2.00pm (CET) will be processed as at valuation point on the next business day.
The Fund's base currency is denominated in sterling (GBP).
Risk and reward profileEdit
The Risk and Reward Indicator table demonstrates where the Fund ranks in terms of its potential risk and reward. The higher the rank the greater the potential reward but the greater the risk of losing money. It is not guaranteed to remain the same and may change over time. It is based on historical data and may not be a reliable indication of the future risk profile of the Fund. The shaded area in the table above shows the Fund’s ranking on the Risk and Reward Indicator.
The Fund is in category 3 because it invests in company or government bonds which are sensitive to changes in interest rates, inflation and credit.
This can be driven by political and economic changes and other significant events and may cause the value to go up and down. Bonds that are closer to their maturity date tend to be more stable in value. Bonds are generally considered to be higher risk investments than cash, but lower risk than company shares.
Even a Fund in the lowest category is not a risk free investment.
The value of an investment is not guaranteed and can go down as well as up; you may not get back the amount you originally invested.
Further information on the risks of investing in this Fund is contained in the Prospectus available at www.lgim.com.
The risk and reward indicator may not take account of the following risks of investing in the Fund:
The Fund has a sustainability and/or ESG focus in its investment process which may i) limit the Fund’s exposure to or exclude certain companies, industries or sectors ii) impact the Fund’s investment performance compared to other funds that do not apply such criteria and, iii) differ from an investor’s own sustainability and/or ESG criteria.
The Fund is a Target Return fund. This type of fund tries to increase the value of your investment over a period of time, in both rising and falling markets. However, there is no guarantee of returns. You may not get back the money you invest. Target Return funds use a range of different types of investment strategies and may use derivatives. It is possible that the value of these funds could go down when the market is rising, or may not rise as quickly.
Prices of the ABS/MBS may be volatile, and will generally fluctuate due to a variety of factors that are inherently difficult to predict. In addition, the terms of the ABS/MBS may restrict its sale in particular circumstances.
The Fund may have underlying investments that are valued in currencies that are different from GBP. Exchange rate fluctuations will impact the value of your investment. Currency hedging techniques may be applied to reduce this impact but may not entirely eliminate it.
Derivatives are highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains. The impact to the Fund can be greater where derivatives are used in an extensive or complex way.
The Fund could lose money if any institutions providing services such as acting as counterparty to derivatives or other instruments, becomes unwilling or unable to meet its obligations to the Fund.
The Fund invests directly or indirectly in bonds which are issued by companies or governments. If these companies or governments experience financial difficulty, they may be unable to pay back some or all of the interest, original investment or other payments that they owe. If this happens, the value of the Fund may fall.
The Fund holds bonds that are traded through agents, brokers or investment banks matching buyers and sellers. This makes the bonds less easy to buy and sell than investments traded on an exchange. In exceptional circumstances the Fund may not be able to sell bonds and may defer withdrawals, or suspend dealing. The Directors can only delay paying out if it is in the interests of all investors and with the permission of the Fund depositary.
Investment returns on bonds are sensitive to trends in interest rate movements. Such changes will affect the value of your investment.
We may take some or all of the ongoing charges from the Fund's capital rather than the Fund's income. This increases the amount of income, but it reduces the growth potential and may lead to a fall in the value of the Fund.
ChargesEdit
The charges you pay are used to pay the costs of running the Fund, including the costs of marketing and distributing it. These charges reduce the potential return from your investment.
| One-off charges taken before or after you invest | |
|---|---|
| Entry charge | None |
| Exit charge | None |
| This is the maximum that might be taken out of your money before it is invested or before the proceeds of your investment are paid out. | |
| The Fund also incurs a dilution adjustment. See opposite. | |
| Charges taken from the Fund over a year | |
| Ongoing charge | 0.55% |
| Charges taken from the Fund under certain specific conditions | |
| Performance fee | None |
There are no entry or exit charges.
The ongoing charges figure is based on the latest available expenses at January 2023. This figure may vary from year to year.
This Fund's ongoing charges include any charges made by any other funds it may invest in. They exclude portfolio transaction costs.
Some or all of the ongoing charges may be taken from the capital of the Fund.
Other Costs:
Dilution adjustment: each day the Fund manager calculates a single price for this Fund based on the mid-point between the buying and selling prices of the Fund's assets. In certain circumstances, the Fund manager can adjust this price to account for whether there is more money going into or coming out of the Fund. This is called a ‘dilution adjustment’. Its purpose is to protect ongoing investors from the difference between the buying and selling prices of the assets in the Fund and costs associated with buying and selling the assets.
The dilution adjustment is separate to the ongoing charges shown in this section. As an example, the dilution adjustment for this Fund was 0.19% for purchases and 0.19% for sales at 23 August 2022. The amount of the dilution adjustment may differ in future.
For more information about charges and the dilution adjustment, please see the sections headed 'Fees and Expenses' and 'Valuation' of the Fund's Prospectus, which can be obtained on our website www.lgim.com.
Past performanceEdit
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| Fund | 1.4 | -0.3 | |||
| Performance objective | 1.5 | 2.6 |
Past performance is not a guide to future performance.
The figures for the Fund take into account the ongoing charges and assume income (after any tax) is reinvested. The figures do not take account of any dilution adjustment or any transaction costs.
The performance has been calculated in GBP.
The annual return is for a 12 month period ending 31 December.
The Fund launched in 2013.
This share class launched in 2020.
The Fund aims to outperform the Benchmark Index by 1.5% per annum (the "Performance objective"). This objective is before the deduction of any charges and measured over rolling three year periods.
On 30 September 2021, the Fund’s benchmark was renamed (from ICE BofA British Pound 3 Month Constant Maturity Total Return Index) by the Index provider.
Practical informationEdit
The depositary of the Fund is Northern Trust Global Services SE.
Further information about the Fund and the share class can be obtained from the Fund's Prospectus and the annual and semi-annual reports, which is available, in addition to the latest prices for the share class and details of any other share classes, at www.lgim.com. These documents are available free of charge in English upon request.
This Fund is subject to the tax legislation of Luxembourg, which may have an impact on each investor’s personal tax position.
This document describes a specific share class of a sub-fund of Legal & General SICAV. The Prospectus and periodic reports are prepared for Legal & General SICAV. The assets of the Fund are segregated by law and belong exclusively to it and are not available to meet the liabilities of any other sub-fund of Legal & General SICAV.
LGIM Managers (Europe) Limited may be held liable solely on the basis of any statement contained in this document that is misleading, inaccurate or inconsistent with the relevant parts of the Prospectus for the Fund.
Investors may switch their shares for another sub-fund of Legal & General SICAV, subject to certain conditions as set out in the Prospectus. Charges may apply.
Details of our Remuneration Policy including our Remuneration Committee and how remuneration and benefits are calculated can be accessed from www.lgim.com/remuneration. A paper copy is also available free of charge upon request.
References and notesEdit
- ↑ Three Month SONIA Index Futures Contract is a cash settled future based on the interest rate on a three month sterling deposit. SONIA stands for Sterling Over Night Index Average. A three-month sterling deposit is a type of short-term deposit account denominated in British pounds (GBP) that typically earns interest over a three-month period. This type of deposit is often used by individuals and businesses to earn a guaranteed rate of return on their cash reserves, while still maintaining easy access to their funds. The interest rate earned on a three-month sterling deposit may be fixed or variable, depending on the terms of the deposit account. Fixed-rate deposits offer a guaranteed rate of return for the entire term of the deposit, while variable-rate deposits may offer a higher or lower interest rate depending on market conditions. Three-month sterling deposits are a relatively low-risk investment, as they are typically insured by the government up to a certain amount (such as £85,000 per depositor per institution in the UK under the Financial Services Compensation Scheme). However, the interest rates on such deposits may be relatively low compared to other types of investments, such as stocks or bonds. As with all investments, it is important to carefully consider the risks and benefits before making any investment decisions.
- ↑ A spot contract is a type of financial agreement between two parties to buy or sell an asset, such as a commodity, currency or security, at the current market price for immediate delivery or settlement. In other words, the transaction is settled "on the spot," usually within two business days. For example, if you buy gold on a spot contract, you would pay the current market price and receive delivery of the gold within two business days. A forward contract, on the other hand, is an agreement between two parties to buy or sell an asset at a predetermined price on a future date. Unlike a spot contract, a forward contract is not settled immediately, but at a future date, which is typically several months or even years later. The price of the asset in a forward contract is set at the time the contract is made, and it is not affected by any subsequent changes in the market price of the asset. For example, if you enter into a forward contract to buy wheat at a predetermined price six months from now, you are protected against any price fluctuations that may occur during that period.
- ↑ A Credit Default Swap (CDS) is a financial derivative instrument that allows investors to protect themselves against the risk of default on a particular debt obligation, such as a bond or loan. In a CDS, one party (the protection buyer) pays a periodic premium to another party (the protection seller) in exchange for protection against the risk of default by a third party (the reference entity) on a specific debt obligation. If a default event occurs, the protection buyer receives compensation from the protection seller, typically in the form of the difference between the face value of the debt obligation and its market value at the time of default. The amount of compensation is determined by the terms of the CDS contract, including the notional amount of the debt obligation, the premium payment frequency, and the maturity date. CDSs can be used by investors as a way to hedge against credit risk, or as a way to speculate on the creditworthiness of a particular issuer or sector. However, CDSs can also be a source of systemic risk, as they can amplify the impact of credit events and contribute to market instability if used excessively or improperly.
- ↑ Exchange-traded futures are standardized contracts that allow traders to buy or sell an underlying asset at a predetermined price and date in the future. These contracts are traded on a regulated exchange and are settled through a clearinghouse. The underlying asset for a futures contract can be a commodity (such as oil, gold, or corn), a financial instrument (such as a stock index or currency), or even an intangible asset (such as weather or electricity). When a trader buys a futures contract, they are agreeing to buy the underlying asset at a specific price and date in the future. When a trader sells a futures contract, they are agreeing to sell the underlying asset at a specific price and date in the future. The price of the futures contract is determined by the market demand for the underlying asset and may fluctuate based on various factors such as supply and demand, geopolitical events, or market sentiment. Exchange-traded futures provide traders with a way to speculate on the price movements of various assets and manage their risk exposure to those assets. Futures contracts can be bought and sold before their expiration date, allowing traders to realize profits or losses based on the difference between the purchase price and the current market price. Because futures contracts are standardized, they are highly liquid and can be traded easily on an exchange.
- ↑ An asset-backed security (ABS) is a security whose income payments, and hence value, are derived from and collateralized (or "backed") by a specified pool of underlying assets.
- ↑ A mortgage-backed security (MBS) is a type of asset-backed security (an 'instrument') which is secured by a mortgage or collection of mortgages.