Fund targets underperformers
London-based Hermes Focus Asset Management Europe (HFAME) is launching its European Focus Fund, which will invest in companies in continental Europe to improve performance through conducting relational shareholder engagement programmes.
The philosophy of HFAME is that shareholder active engagement can improve performance of companies with hidden underlying value whose businesses are fundamentally strong but where concerns regarding direction mean shares are underperforming.
Since issues related to corporate governance and shareholder rights differ from country to country, the first step for HFAME was to find the right partners in the continent to build a fund that it is expected to attract e1bn over the next few years. So far the European Focus Fund has attracted around e300m assets from several major institutional investors in the UK and continental Europe.
The new fund will follow the approach of the Hermes UK Focus Fund which has been running for three years and has now a size of £600m and 20 clients investing in UK-based companies.
“During the first stage we’ll be investing in underperforming companies in France and Germany, and we are planning to extent this to other European countries in the near future,” says Stephan Howaldt, chief executive of HFAME. “Corporate governance issues differ from country to country and you have to take into account aspects related to shareholder rights, board composition and so on.”
He adds: “ In general shareholder rights are not that bad, and in some countries they are better than those in the US.”
HFAME’s team is integrated by senior continental Europeans, including nationals from Germany, France, Italy, Spain and the Netherlands, with long experience in the corporate and investment sectors.
Regarding the European team Hermes’ global head of the Focus Funds Peter Butler says: “We want to have meaningful dialogues with companies, based not only on detailed company knowledge but also on a true cultural understanding. Our European team is now in place and makes Hermes the fist major institution with the appropriate resources to exercise institutional shareholder engagement on a truly pan-European basis.”
Butler adds that Hermes expects the European Focus Fund to be a catalyst for change across Europe.