Hermes Pensions Management, the fund manager which manages assets for four of the UK’s seven largest pension funds, is set to make a move into direct private equity investments with a £200m fund targeting mid-size investments in Europe.
The capital for the fund will come from the BT Pension Fund, according to eFinancial News. Until now, Hermes has channeled £550m into private equity through other firms' private equity funds. The new fund is going to target mid-sized management buyouts, primarily in the UK, but with an option to invest in Europe.
Rod Selkirk, who is Hermes' head of private equity investment, is well suited to participate in such a strategy. Prior to joining Hermes he was with mid-market buyout specialist Bridgepoint Capital and prior to that 3i. Selkirk plans to hire four staff, matching current levels at the firm’s fund of funds operation. The company says it will look to invest between £15m and £25m in growth companies worth £100m to £200m.
Tony Watson, chief executive of Hermes Pensions Management said at the time of Selkirk’s appointment that the firm planned to play a greater role in the private equity market. “We plan to make further appointments in private equity to reflect the increased level of commitments to this asset class that we are seeing from our clients,” he said.
Hermes Private Equity will ultimately look to raise capital from third party investors. The fund will also consider European investments alongside funds in which Hermes is already invested.
Hermes has announced two recent investments, including an undisclosed commitment to the final close of Indigo Capital's E475m mezzanine fund, and a participation in the first close of Activa Capital's French mid-market fund, which has so far raised E90m.