BT pension affirms commitment to buyouts

Hermes Private Equity has secured a £300m commitment for a new direct private equity fund from the BT Pension Scheme.

The BT Pension Scheme (BTPS), one of the largest of its kind in Britain, has signed off on a £300 million (€446 million; $602 million) commitment to Hermes Private Equity Partners (HPEP) III, a new European mid-market buyout fund. The fund will be managed by Hermes Private Equity, the private equity arm of Hermes Pensions Management.

BTPS is one of two UK pension clients that use Hermes Private Equity as a semi-captive private equity investment platform for direct deals in Europe as well as private equity fund investments globally. The other is the pension scheme of Royal Mail.

Between them, the pensions funded HPEP II, a £250 million partnership formed in September 2005, which according to Hermes is currently 70 percent invested. BT committed £183 million to the fund, with Royal Mail providing the balance.

HPEP I was set up in 2003 with 200 million to invest. According to Rod Selkirk, chief executive of Hermes Private Equity, six of the seven investments backed by the fund have been realised.

BT’s pensioners have an overall allocation of £1.8 billion to private equity. Last year, the scheme doubled the allocation from 2 percent to 4 percent, a strategic move that the scheme’s trustees remain fully committed to, Selkirk said.
In an interview, the former BVCA chairman said: “We continue to believe that private equity delivers good performance that is not just dependent upon the use of leverage. We continue to believe that private equity has a corporate governance structure that is a good structure. And we also continue to believe that the private equity funds we invest in take a responsible approach to their investments in Europe, North America and Asia.”

Hermes Private Equity now manages approximately £1 billion in private equity capital.

Along with the creation of the new buyout fund, the firm has also announced the appointments of Steve Bonnard from Deloitte Corporate Finance, Robin Lawson from LEK and Tim Thomas from RJD Partners to the direct investment team.

On the fund investment side, Hermes has brought in Susan Flynn, a partner at Coller Capital who will start her new role in September, as well as Khim Tan, an investment professional formerly employed by GIC, the investment arm of the government of Singapore.  

Hermes now has nine executives on the direct investment team and five professionals who focus on fund investments.

Rod Selkirk oversees both activities.