The investment management arm of London-listed Legal & General has been appointed to provide a new smart beta solution.

Legal & General Investment Management will be the first in Europe to implement a FTSE RAFI Low Volatility strategy.

LGIM was appointed by the UK's Pension Protection Fund to roll out the strategy, which will measure the performance of a basket of low volatility value-screened stocks. The strategy aims to boost risk-adjusted returns through improved performance and reduced risk. 

Measures of company size rather than market capitalisation will be used to determine constituent weights, resulting in a portfolio that has lower turnover and higher liquidity and capacity, according to the firm. LGIM said its implementation of the mandate reflects its position as a leading provider of smart beta index solutions.

“In times of economic turbulence the strategy is designed to give surety and meet specific performance criteria required by the PPF. The strategy is the first of its kind in Europe at the moment and I would expect it to generate significant further interest,” said LGIM's head of index fund distribution, Adam Willis.

“With many markets richly valued, some are looking for an efficient way to de-risk the equity exposures within their portfolios. For these investors, a low volatility approach—like the FTSE RAFI Low Volatility strategy—may make a lot of sense,” said Research Affiliates' co-founder and vice chairman, Jason Hsu.

LGIM managed £714.6 billion ($1.09 trillion) in total assets for more than 3,000 clients as of the end of June.