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New L&G unit aims for investment link-ups

Legal & General is issuing a £500m convertible bond to separate its investment management arm from its life fund, creating a new unit which will aim to forge investment links with smaller life offices.

The investment management business will be taken out of L&G&#39s long-term fund and become a separate business within the group.

The bond will allow £400m to be put into the life fund to support new business from its Barclays, Alliance & Leicester and IFA channels.

L&G says this figure is enough for the fund to withstand any further sharp market falls.

The new unit will look to white-label its index funds to smaller insurance companies. This would mean another insurance company would invest the majority of its portfolio in white-labelled L&G index funds.

It is also looking to expand selling opportunities in Eur-ope by seeking white-labelling opportunities for retail funds.

The bond and investment business transfer are subject to FSA approval.

L&G says two-thirds of the fund management arm&#39s business is unit trusts and Isas, meaning it is no longer a necessary part of the longterm fund.

Head of PR John Morgan says: “We believe a number of insurance companies will need to reduce fund management costs.

“By investing the majority of the portfolio into our white-labelled index funds, they can cut costs and concentrate on smaller active management.”

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