Federated Investors has taken a majority stake in UK-based Hermes Fund Managers for $351 million, which specializes in ESG strategies.
The Pittsburgh-based manager struck a deal to buy a 60% stake in Hermes from BT Pension Scheme (BTPS), a private sector retirement fund in the UK. BTPS will retain 29.5% and the Hermes management team will keep the remaining 10.5%.
‘The agreement with BTPS brings to Federated great people, a growing global client base, a history of strong performance and one of the world’s leading active ESG investment and engagement businesses,’ said J. Christopher Donahue, president and chief executive of Federated.
The transaction, which is expected to be completed in the second half of 2018, was approved by the Federated and BTPS board but is still subject to regulatory approval.
After completion, BTPS will have the option to sell additional shares in Hermes over the next three to six years and Federated can also purchase additional interest. Hermes will remain headquartered in London and will operate as a subsidiary of Federated.
‘Through this opportunity, the same Hermes investment and stewardship teams will remain dedicated to our investment philosophies in London, while our products and services gain greater exposure through the network of 8,500 financial intermediaries and institutions that already do business with Federated,’ said Saker Nusseibeh, chief executive of Hermes.
Hermes was established in 1983 as the principal investment manager of its owner, BTPS. In 2014, Hermes rebranded from Hermes Fund Managers to Hermes Investment Management, a move that accelerated its evolution into a third-party asset manager. Today Hermes manages $44.6 billion across 16 strategies in equities, credit, real estate, infrastructure, private equity and private debt. Hermes generates roughly 70% of its revenues from external clients, compared with 15% five years ago, according to the firm's website.
Combined assets under management between Federated and Hermes will total $442.2 billion.