The UK’s £40.3bn (€57bn) BT Pension Scheme (BTPS) is almost doubling its exposure to private equity, awarding a £1bn mandate to Hermes GPE to invest in the asset class internationally.
According to the most recent BTPS figures, the pension fund had £1.2bn invested in private equity at the end of June 2014, which represented 3.2% of total assets.
Much of this exposure is already invested via Hermes GPE, though precise figures were not available.
Hermes GPE — part of Hermes Investment Management, which is in turn owned by BTPS — will see its assets under management grow to £4bn as a result of the mandate.
Simon Moss, partner at Hermes GPE, said: “The mandate will allow us to further enhance our relationships in the market as we put the funds to work, and demonstrate our proven execution capability to our global deal sourcing network.”
The firm said the £1bn allocation will be invested over three years, and divided equally between funds and co-investments.
The money will be invested globally by its investment team of 16 staff, working out of London, New York and Singapore, it said.
Hermes GPE said it makes the most of private equity exposure on behalf of institutional investors by using a mix of co-investments from around the world, and investments in primary funds.
The firm said it had been an “early adopter” of the co-investment approach within private equity, and had raised $480m for its co-investment fund Hermes GPE PEC II LP at the close in September 2014.
This fund was already around 82% committed, and was expected to be fully committed by the end of 2015, it said.
The BTPS has been increasing its overall exposure to alternatives in recent months, having been involved in buying stakes in rail company Eurostar and Associated British Ports via Hermes Infrastructure.
In March, Hermes Infrastructure bought 10% of Eurostar on behalf of several pension funds when the UK government sold off its stake in the company for £585.1m.
In the same month, the infrastructure manager and the Canada Pension Plan Investment Board (CPPIB) jointly acquired 30% of ABP for £1.6bn.