Hermes rounds off second fund

Hermes Private Equity, one of very few direct investors to be captive to a pension fund, has announced the final closing of its second vehicle, Hermes Private Equity Partners II, on £250m. BT Pension Scheme (BTPS), the owner of Hermes, has committed £183m to the new fund.

In addition, for the first time the group has raised money from an external investor, Royal Mail Pension Plan, which has committed £100m in total to the group’s two direct private equity funds.

The first vehicle, HPEP I, initially raised £200m from BTPS in 2003 and has invested £125m to-date in seven deals over the last two years. It has sold two of its investments including the extremely quick flip of Merlin Entertainments, which it sold to Blackstone in a tertiary buyout earlier this year. Although criticised in some quarters for completing largely secondary deals, the group boasts returns of more than 2.5x the invested capital on its investments to-date.

Like the first fund, HPEP II will invest in middle-market buyouts in the UK and Europe, typically valued in the range of £20m to £120m. All new investments will be made through the new fund, with HPEP I making follow-on investments to support existing portfolio companies.

As well as making direct investments, the firm has long operated a diversified third-party investment programme.