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IPE special report May 2018

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Hermes wins £1bn commodities mandate from BT

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UK – Hermes Pensions Management today announced a £1bn (€1.5bn) commodities investment on behalf of its owner and cornerstone client, the £34bn BT Pension Scheme (BTPS).

According to Hermes, this is “the largest single allocation to commodities of any institutional investor in the UK”.

It will be invested via Hermes’ newly established Hermes Commodity Index Fund (HCIF) – an open-ended Guernsey-registered and listed fund that will track price performance of 24 commodities of the Goldman Sachs Commodities Index through futures and swaps.

Hermes said the HCIF might be opened to other funds in the future. However, it would not comment on whether its other major pension fund clients – including Royal Mail, Sainsbury’s, Unilever, ABP of the Netherlands and CalPERS of the US – would make similar investments in commodities in the future.

A Hermes spokesperson told IPE that the BTPS investment – which amounts to 3% of the scheme’s total funds – was a shift from equities to commodities.

The spokesperson said there are currently no plans by the BTPS trustees to increase the £1bn allocation to commodities. The scheme has allocated roughly 10% to alternative investments, which include hedge funds and private equity.

“It has become evident that schemes should not rely on bonds and equities alone to deliver consistent returns in order to meet the long-term promise to members, while simultaneously reducing the burden on the sponsor,” said Hermes strategy chief James Walsh.

“All schemes with a substantial allocation to equities should seriously consider adding in commodities.”

Hermes says it currently invests £55bn on behalf of more than 200 clients, including pension schemes, financial institutions and insurance companies.


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