UK - Hermes Fund Managers Limited and Gartmore Investment Management Limited have combined their private equity fund of fund businesses into a new company Hermes GPE LLP, which will have strong focus on responsible investing.
Following approval from the Financial Services Authority (FSA), the merger leaves Hermes GPE with combined assets of around £4.1bn (€4.5bn) and a list of 20 clients, of which just under half are based in the UK.
The new company will be headed by Alan MacKay as chief executive officer while Kevin Carter, a member of the NAPF investment council and former European head of the investment practice at Watson Wyatt, will take on the role of non-executive chairman responsible for setting the governance tone and regime.
Through his previous dealings with trustees and pension professionals, MacKay said Carter's "connectivity" and recognition would provide an additional dimension to the team's management.
MacKay, who joins from 3i, said: "The thing that attracted me here was a chance to play a part of what I think is a structural shift in the way the whole private equity asset class operates. Access to big names and the arithmetic pursuit of returns has shifted radically in the last couple of years; people are now looking for private equity that is investing responsibly and delivering those financial returns."
He argued the private equity industry has matured to a global level, and claimed investors need a lot of resources to address it as a "global asset class opportunity".
"You need scale, a track record and competence about financial performance and returns, but also if you're going to be in all those different jurisdictions, primary capital pension funds in the UK, Europe, US and Japan want to see responsible investing; they want to be assured and comforted that money is going into things where boards are co-operating properly and [where] there [are] independent directors on the boards," said MacKay.
He predicted there will be further consolidation in the private equity funds of funds space in the short-to-medium term. For now, however, the new company intends to grow the number of clients by targeting mid-sized pension funds, in particular, that have just two or three in-house people looking after a scheme's private equity allocation.
MacKay said: "If you really want to be covering global private equity - including new niches of infrastructure, special sector funds and healthcare - you need the resources. I think a lot of these mid-size pension funds will be looking to move from subscale in house management of the private equity allocation to doing a mandate with people like Hermes GPE who are skilled up to deal with global private equity."
The new business will also see Susan Flynn and Peter Gale, who headed the private equity teams at Hermes and Gartmore respectively, appointed as co-chief investment officers of Hermes GPE.
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