Home > News > Risk > L&G Pushes into Outsourcing with LDI-to-Buyout Suite
Risk

L&G Pushes into Outsourcing with LDI-to-Buyout Suite

From liability matching through to a 0% transaction cost buyout—Legal & General has fired the starting pistol on outsourced de-risking.

 In a push into the growing outsourcing market, Legal & General Investment Management (LGIM) has launched a “Buyout Aware” service for UK clients.

The service will centre on three elements: a combination of LGIM’s liability-driven investment (LDI) capabilities; tracking buyout prices using the company’s insurance and bulk annuity arms; and a “default transaction cost of zero” L&G buyout, if desired by the client.

The service should allow pension managers to take control of their endgame objectives, which may be either self-sufficiency or buyout, according to the Aaron Meder, head of LGIM’s solutions group.

Meder said the service combined the “building blocks” already present within LGIM’s arsenal.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Pensions using the service would invest in a bespoke blend of LGIM corporate bond and liability matching funds, with the outsourcing coming into play as the company uses its expertise across LDI, active fixed income, index, and managing insurance assets generally.

Meder said pensions would be invested in a range of four funds—with a combination of real and nominal targets—that each had different durations. Using a combination of these funds would mean investors would end up with a bespoke product for their needs.

The service may leverage LGIM’s position as the largest LDI provider in the UK. The company has a 44% market share, with around 3,000 clients on its books.

It is the first time the company has explicitly labelled a service as an outsourced product. Meder said the decision had been taken due to increased demand for a “holistic matching solutions” from its clients.

For an in depth look at OCIO and its impact on de-risking, sign up to receive CIO’s annual LDI/De-risking edition, released next month.

Related content: LDI Specialist Cutwater to Fold into BNY Mellon & VIDEO: OCIO Isn’t the Only Way to Stay Competitive, Argues Frontier Advisors Head

Home > News > Regulation > Sued OCIO Fights Back
Regulation

Sued OCIO Fights Back

JP Morgan has asked a judge to throw out a case because it claims it had full discretion over investment choices.

A church foundation’s lawsuit against former outsourced-CIO (OCIO) JP Morgan may be dismissed, if a judge agrees that the bank had full authority over the portfolio but no liability for losses.

The suit—filed in August by an Indianapolis church and former OCIO client—alleged that JP Morgan had invested its assets in “clearly unsuitable investments” and charged ballooning fees.

The bank filed a 40-page motion on October 7 to have all but one count of the church’s claims dismissed. 

JP Morgan argued in court documents that the suitability of investments were not the church’s to judge. “The church was not the party making, or empowered to make, investment decisions,” it said.

For more stories like this, sign up for the CIO Alert newsletter.

Two charges center on anti-fraud law, which JP Morgan said does not apply because the church had no legal say or hand in the investment of its assets.

“A trust beneficiary that has no investment authority cannot pursue a securities fraud claim against a trustee, such as the bank, that has discretionary authority to invest trust assets as the trustee alone deems appropriate,” the bank’s lawyers wrote in court filings. “Put another way, the church cannot sue for securities fraud because it neither purchased nor sold the securities held by the trusts.”

Another claim of fraud by the Indianapolis church was deemed invalid by JP Morgan because the foundation failed to prove it had meaningfully lied or misrepresented information. Furthermore, according the OCIO, the church did not provide evidence to show it would have behaved differently to better ends had JP Morgan disclosed more and/or accurate details.

Finally, the bank sought to have the charge that it breached fiduciary duty dismissed because it was redundant of the breach of trust claim—the only one out of five charges it is not contesting at this point.

“Here, count II and count V do not differ at all because breach of trust and breach of fiduciary duty are synonymous under Indiana law,” the bank’s lawyers noted.

Related Content: Former OCIO Client Sues JP Morgan for Losses; OCIO Buyer’s Guide Review of JP Morgan

«