Legal and General Investments (LGI) is to launch a passively managed sterling corporate bond fund, subject to FSA approval.
The firm is launching the fund in preparation for RDR, as it says that there will be a “significant shift to passive funds” as a result of the new rules.
The fund will invest in corporate bonds rated AAA, AA or A, which historically carry the lowest risk of default and the highest levels of liquidity.
L&G already manages £35bn in UK fixed income index funds. It is planned that the fund will be made available through all major fund platforms.
LGI sales director Frank McGarry said: “As the deadline for RDR implementation rapidly approaches there has been a significant shift to passive funds in the UK advisory market. Many portfolio constructors are opting to blend both active and passive funds within client portfolios and this is a trend that we expect to gather momentum.”
After it is implemented at the end of this year, the RDR will abolish commission payments on new business from product providers to advisers – which passive funds have not historically offered. It will also force IFAs to consider the whole of the investment market, including passive funds, for their clients, instead of traditional actively managed fare.
Vanguard, one of L&G’s major passive fund rivals, has already launched a passive sterling corporate bond fund ahead of RDR. iShares has also been marketing a passive sterling corporate bond exchange-traded fund to retail investors.