Hermes goes for direct investments

Hermes Investment Management is to launch its first fund for direct investments in private equity. Hermes Private Equity will have £200 million for investment from the BT Pension Scheme to invest in mid-market companies mainly in the UK. It will also co-invest in continental Europe with funds from its fund-of-funds portfolio.

Rod Selkirk, a former Bridgepoint managing director, will head the new division and is in the process of building a team. He is looking to recruit a further four staff to join him and director Chris Clark. Selkirk says the £200 million from the BT Pension Scheme will stand the team in good stead and the group will not be actively seeking external investors, although he adds there is no reason in the future why they wouldn’t accept further funding.

Selkirk anticipates a good flow of deals, but is holding back on investments for the time being until he has the full team in place. The fund will be making classic mid-market investments of between £10 million and £30 million in growth companies worth between £100 million and £200 million. Hermes Investment Management continues to invest in private equity funds across Europe through its private equity division and a joint venture with UOB Global Capital, the Hermes UOB European Private Equity Fund. Selkirk says in continental Europe the new fund will make co-investments with the funds in Hermes fund-of-funds portfolio to avoid any conflict of interest.

Hermes Private Equity Management is a wholly-owned subsidiary of Hermes Investment Management, which is the principal investment manager of the pension schemes of British Telecommunications plc (£30 billion) and the British Post Office (£18 billion). The trustees of the BT Pension Scheme ultimately own Hermes. Hermes manages £330 million of private equity of which £263 million is in funds and £67 million is in direct investments.