Hermes Investment Management’s chief executive has blamed the changing investment landscape for the BT Pension Scheme’s (BTPS) decision to terminate a £8.4bn (€11.9bn) bond mandate.

According to a statement released by BTPS, the UK’s second-largest fund decided to move away from the actively managed government bond strategy after concluding a passive approach would be more cost effective.

The statement added that Hermes achieved a strong performance from the mandate, and that the manager wholly owned by BTPS would continue to oversee 30-40% of its assets – a reduction from half of the fund’s assets at the end of June 2014.

Saker Nusseibeh, who has been chief executive of Hermes since 2012, said he “wasn’t particularly surprised” on hearing last week about the loss of the mandate, noting the trend among UK pension funds to focus on liability management.

Although he conceded the £8.4bn mandate was sizeable – it accounted for approximately 28% of the manager’s £29.5bn in assets under management as of the end of September – he pointed out that it accounted for just 3% of the company’s annual revenue, and produced only a small profit.

“It was marginally profitable, but only marginally,” he told IPE. “In terms of bottom line, it honestly doesn’t make a difference.”

Nusseibeh said discussions were ongoing with two staff directly affected by BTPS’s decision to terminate the mandate, but he would not be drawn on any departures.

Hermes has steadily increased the level of revenue from third-party clients, rising from 18% at the end of 2011 to 51% by September 2015, according to figures provided by the manager.

According the company’s 2014 annual report filed with the UK’s Companies House, it saw income from management and performance-related fees increase by £2.8m to £32.8m over the course of the financial year – broadly on par with the £32.6m reported at the end of 2011.

Over the nearly four-year period, Hermes has only seen assets under management increase by around £3bn.

But its stewardship business, Hermes EOS, has seen assets under stewardship increase to £146bn, up from £86bn in 2011.

BTPS remains loyal to Hermes in other areas, recently doubling the size of a private equity mandate overseen by Hermes GPE