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How Hermes found its wings

With global development head Harriet Steel on board, Hermes Investment Management has seen assets soar in its wholesale division following a vigorous revamp and recruitment campaign  

Ian Pascal HermesThe start of this quarter marked something of a milestone for Hermes Investment Management as the group unveiled its new name and branding following what would best be described as a three-year transformation.

Formerly Hermes Fund Managers, the firm’s wholesale arm has been reconstructed under the helm of Harriet Steel, global head of business development, who was appointed in November 2011 from Portico Advisors to revamp the division. Hermes’ origins date back to 1983 but it was not until 2007 that the group ventured into the wholesale market.

The firm, which is owned by the BT pension scheme, split its pension and asset management businesses and announced plans to become a leading third-party asset manager with a focus on responsible asset management.

In 2008 the group unveiled its Ucits fund range with a trio of launches: Hermes Global Emerging Markets, Hermes Global Equity and Hermes UK Small & Mid Cap Companies. However, unfavourable factors such as the subprime crisis taking hold and little by way of a public profile were stacked against the launches and meant wholesale flows were sluggish.

It was in this climate that Ian Pascal, who was Barings Asset Management’s head of global marketing at the time, was first approached to join the group, back in 2011. Recognising that Hermes was “a very internally focused company” without the personnel in place to reach a wholesale audience, Pascal says his response was: “Thanks, but no thanks”. So what changed?

“Under Harriet’s leadership Hermes has turned from being internally focused to externally focused.”

Pascal, who has worked in financial services for most of his career and was at Barings for 11 years, says it was a conversation with Rob Page, a former colleague at Hill Samuel, that prompted him to take another look at Hermes. Page had recently led the marketing team at Hermes for a short stint before moving to Henderson Global Investors.

“I had a fantastic time at Barings building the business and the brand; it was great, I really enjoyed it,” Pascal says. “It is a successful business with a very successful Asian business. I learnt more there than I have anywhere and we had a team of 40 people in locations all over the world. But I got to the point where I was looking for the cliche that is a new challenge. Rob Page suggested meeting Harriet Steel, so I met her and I was really impressed by her, her vision and dynamism and the business perspective of growing Hermes,” Pascal says.

Much had changed at Hermes since Pascal’s previous encounter with the firm, with Steel’s appointment at the crux of the transition.

“Under Harriet’s leadership Hermes has turned from being internally focused to externally focused,” says Pascal. “Harriet has brought in a lot of people with an entrepreneurial approach.”

Steel’s achievements since she donned the mantle in 2011 are impressive. Tasked with increasing Hermes’ third party assets, she has seen them grow by 205 per cent since joining the firm. At the start of 2012 Hermes’ third party assets represented 8 per cent of revenue, whereas they now account for almost 40 per cent, with £6.4bn in third party assets under management as of 30 June this year. In total, Hermes Investment Management has £27.9bn in AUM as of the end of June.

This surge in sales is no doubt attributable to Steel’s no-holds-barred recruitment drive.

Pascal joined the firm in September 2013 as head of marketing and communications.

“Of course, I did my due diligence and looked at the performance numbers, and the performance of the funds was really strong, and that continues to be the case now,” Pascal says. “Also, the types of assets – infrastructure, real estate, private equity and the engagement team [share owner advisory service Hermes Equity Ownership Services] – are something really different, which I had not had before.

“I thought: ‘Wow – great tools and a great message’. But the brand was minimally known, so from my perspective that’s brilliant because there is lots to work with. I can move the dial.”

Having marked the first anniversary in his new role at Hermes, what has Pascal achieved over the past year?

“We have made significant strides, but we have still got miles and miles to go,” he says.

“There were two phases to the plan for the first year. First was to create a fully integrated marketing and communications team, supporting the dissemination of Hermes’ story and getting investment managers’ views into the market.

The company: Hermes is headquartered in London and employs 418 people. Founded in 1983 the asset management group is focused on responsible investing and has £27.4bn in assets under management, as at 30 June 2014.

“Second was to re-brand Hermes and move to a unified global brand; previously we had a segmented UK brand. Before, each team had its own branding and global identity, which was confusing – there were 12 corporate identities, whereas they are all called Hermes Investment Management now. We changed the logo and did an Orwellian job of getting rid of the old logo, which was small and static. This is just the start, but an integrated message makes cross-selling easier.”

Plans for the year ahead include tapping into the benefits of big data to better identify and communicate with clients, Pascal says.

“The next stage is about creating tech platforms, rebuilding the website and looking at our digital marketing capabilities. By using our sales force and the client asset management system we can track how people are interacting with us and can assign value to their interest. If a potential client is really interested in us we can then go and make contact. We have moved on from the mass email blast to tailored communications. It’s big data. We want to provide ever more relevant information to people.”

There are 11 funds in the Dublin-domiciled range, the most recent launches being the Hermes Multi Strategy Credit and Hermes Global Equity ESG funds, both launched in May this year. All bar the latest two launches have triple-digit AUM. The funds are wholesale versions of the institutional mandates and tend to be fairly niche. For example, a UK large-cap mandate is absent from the range and likely to stay that way.

“We are more interested in products which are harder to access; more specialist funds,” Pascal says. “We don’t want to bring out me-too funds.”

However, the group is looking at rolling out new products in the coming year. In August the group hired Zoe Shaw from Promethion as head of fixed income with a view to expanding its fixed income capabilities, while a multi-asset offering is also in the pipeline.

“The fixed income side will be an interesting area next year,” Pascal says. “That and a multi-asset offering. It will really be those areas and more of the same.”

He adds: “Having got to the stage where we have re-branded, it is really about pushing out and showing people what we can offer.

“While Hermes is 30 years old as a firm, it’s actually only three years old as an external company. It has the start-up spirit to try new things.”

Hermes

Independent views

Kelly Prior F&C

Kelly Prior, investment manager, F&C’s multi-manager team

Hermes’ offices in the “value” end of the City are a good lead in to what this long-established and, until recently, low-profile asset manager represents. Functional and not flashy, it adheres to its BT pension fund origins and ethics. Its products are more innovative and interesting than such heritage might suggest, usually road-tested with internal money before they are offered to the market. Its fund managers are typically forthright and their opinions on how to make, and importantly not to lose, clients’ money through a cycle stand out, extending to fund capacity limits. Hermes is one of the most exciting investment houses.

Darius-McDermott-480.jpg

Darius McDermott, managing director, Chelsea Financial Services

While a relatively new name in the UK funds market, Hermes Investment Management has been investing in UK and global markets for more than three decades through its institutional relationship with the BT Pension Scheme. The firm, which manages more than £27bn of assets, is definitely one on the rise – having trebled third party assets from £2bn to more than £6bn over the past three years. The group has a strong focus on alpha generation and offers investors a number of compelling high-conviction active strategies, including Jonathan Pines’ Emerging Asia ex Japan fund, and Fraser Lundie’s Multi Strategy Credit fund.

David Hambidge Premier

David Hambidge, director of multi-asset, Premier Asset Management

With over £27bn under management, Hermes could hardly be described as a boutique, yet this asset manager does have that feel about it. Their emphasis on long-term investing and commitment to producing superior risk-adjusted returns is certainly aligned with our own investment philosophy. We have been investing with Hermes for over a year now, with investments in the Asia ex Japan Equity fund, US SMID Equity Fund and more recently, the Multi Strategy Credit fund which was launched in May this year and provides a relatively defensive route into global high yield bond markets.

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