BT Pension Scheme sells remaining stake in fund manager Hermes

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BT Pension Scheme (BTPS), one of the UK’s largest corporate defined benefit pension schemes, has agreed the sale of its remaining stake in Hermes Fund Managers Limited (HFML), to Federated Hermes.

The asset manager will pay £116.5m (€136m) to BTPS for its remaining 29.5% interest in HFML, which was valued at £395m.

The agreement marks the end of more than a decade of BTPS’s ownership of Hermes, which began life in 1995 when BTPS became the sole shareholder of PostTel Investment Management, its in-house asset manager since 1983.

In 2018, BTPS sold its majority stake in Hermes to Federated Investors, which led to the creation of Federated Hermes in 2020. The transaction provided a call option for Federated Hermes to purchase the rest of HFML and gave BTPS a put option to sell its residual shareholding in HFML, in both cases between three-to-six years after the original agreement.

“We are pleased to see the business flourish under new ownership, making the sale of our residual shareholding a simple, logical next step,” said Morten Nilsson, chief executive officer of BT Pension Scheme Management.

“We retain strong links with HFML and look forward to working with them as we focus on managing £57.5 billion in assets towards our 2035 net-zero goal as a responsible and engaged investor on behalf of our members.”

As of the end of July, BTPS has $12bn invested in several Federated Hermes sponsored or managed investment products, including $10.1bn in long-term private markets strategies.

J Christopher Donahue, president and CEO of Federated Hermes, said that over the past three years “our shared values and mutually beneficial areas of expertise have given us the opportunity to engage with BTPS and enjoy an open dialogue with them as a key client and owner”.

“Our combined investment management, stewardship and distribution experience make it prudent for FHI to complete this deal in a timely fashion so that we can continue to focus on expanding our investment and stewardship capabilities while growing our global distribution footprint.”

Saker Nusseibeh, CEO of HFML, said BTPS had been supported and championed Hermes’ approach to responsible investment and sustainable wealth creation “long before many had understood its importance”.

He added: “Completing this transaction represents an important milestone for our firms and is a consequence of the close collaboration and cultural fit we have enjoyed since Federated Hermes acquired its majority share in 2018.”

An employee benefit trust continues to hold around 10% of HFML.