Hermes Funds-of-Funds Group Is Launched

Two London-based private equity fund-of-funds managers have joined forces to create Hermes GPE, a new funds-of-funds group.

The new business is the result of a merger between Gartmore Private Equity, a division of Gartmore Investment Management, and Hermes Private Equity, a division of fund manager Hermes. The combined business will have around £4.1 billion ($6.3 billion) under management. Buyouts reported on the proposed merger in early January. Richmond Park Partners LLP, specialist private equity advisers, acted as adviser on the merger.

Headquartered in London, Hermes GPE has 29 employees led by CEO Alan MacKay, who works closely with Co-Chief Investment Officers Susan Flynn and Peter Gale, who previously led the respective teams at Hermes Private Equity and Gartmore Private Equity. MacKay joins from U.K.-based buyout house 3i Group, where, for more than 20 years, he held numerous senior management positions. As a lead partner, his most recent responsibilities included international expansion in developed and emerging markets and the development of specialist sector expertise.

“There are huge opportunities in private equity for proven teams that offer responsible investment management,” said MacKay in a prepared statement. “We have built these qualities into Hermes GPE to better serve existing investors and to attract new clients with exactly the proposition they are asking for.”

Hermes GPE has more than 20 institutional clients, half based in Europe, and the rest in the United States and Asia. About 40 percent of the 100 managers Hermes GPE has backed are based in the United States, another 40 percent in Europe, and the remainder in Asia and elsewhere. Most of the Gartmore Private Equity funds have been earmarked for small to mid-market European buyout funds and co-investments, while those of Hermes Private Equity have gone to large European and U.S. buyout and infrastructure funds.

The firm is in the process of reaching a final close on a cleantech fund-of-funds, the Government-backed U.K. Innovation Investment Fund. That fund is to be earmarked both for pure venture funds, as well as expansion-stage funds.

Backed by buyout shop Hellman & Friedman, Gartmore Investment Management was acquired by its management in 2006. The former Gartmore Private Equity team has been investing in private equity since 1991, managing about €2 billion ($2.7 billion) of funds-of-funds vehicles and separate accounts on behalf of institutional clients.

The former Hermes Private Equity team has been investing in private equity since the 1990s, and that group had more than £1.7 billion of assets under management in private equity funds as of September 2009. Since 2004, fund investments were made through annual partnerships. Each annual fund would commit up to £400 million in 12 to 20 primary partnerships diversified by geography, year and sub-asset class.