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Our transformation

We are an asset manager with a difference. Our mission is to help beneficiaries retire better by providing long-term holistic returns for savers, thereby creating value of all stakeholders in the financial system.

To achieve this, we have undergone considerable change – and this transformation has been driven by an intense focus on delivering strong risk-adjusted performance for clients and positive outcomes for society and the environment.

Ownership

We embarked on an exciting new chapter of our evolution in April 2018, when Federated Investors, Inc, one of the largest investment managers in the US with $459.9bn1 assets under management, announced an agreement to acquire a majority interest in Hermes from the BT Pension Scheme (BTPS).

For us, the transaction serves as a growth opportunity, joining with Federated to form a truly global asset manager – dedicated to active management – with mutually beneficial capabilities that leverage both Federated’s extensive network of financial intermediaries in the US and our own fast-growing client base in the UK, continental Europe and Asia.

Furthermore, we have a mutual commitment to shared values in meeting client needs, thereby ensuring that we continue to be dedicated to our role as a responsible steward of investments.

In July 2018, Federated completed the acquisition, at a cost of £246m. BTPS retained a 29.5% interest in Hermes, and a 10.5% interest in Hermes was placed into an employee benefit trust by BTPS for the benefit of certain members of Hermes’ management and other employees.

In the same year, Federated filed for the Federated Hermes SDG Engagement Equity Fund with the SEC – a 40 Act version of our SDG Engagement Fund – which marked the beginning of our distribution in the US through Federated.

High conviction, active investment strategies

In the past decade, the investment industry has been increasingly challenged by the rapid growth of passive vehicles, particularly exchange-traded funds.

During this time, our commitment to active investing has never wavered: we combine high-conviction investment with ESG analysis and active ownership across all of our strategies.

In recent years, we have diversified our business by developing a broad and deep fixed-income platform, providing specialist capabilities across the spectrum of the asset class – from corporate bonds and synthetic instruments to loans and asset-backed securities. This platform has been built to help investors respond dynamically to opportunities throughout market cycles.

In addition, we established a thematic franchise – spearheaded by Hermes Impact Opportunities and Hermes SDG Engagement Equity, and with further products in the pipeline. Both of these public-equity impact strategies focus on investments connected to the Sustainable Development Goals (SDGs). By respectively seeing impact and working with companies to deliver positive change tomorrow, these distinct capabilities show that sustainable investing remains core to our identity and purpose.

Here is a snapshot of some of the strategies that we launched in the past six years:

Global Equity ESG

It aims to: achieve capital appreciation by investing in global equity securities with favourable ESG

Launch date: May-13

Multi-Strategy Credit 

It aims to: generate a high level of income by primarily investing in a diversified portfolio of credit securities

Launch date: Jun-13

Global Small Cap Equity 

It aims to: achieve capital appreciation by investing in global equity securities with favourable ESG

Launch date: Jul-11

Absolute Return Credit

It aims to: achieve absolute return regardless of wider market circumstances, across asset classes and geographies

Launch date: Jun-15

UK Direct Lending

It aims to: consistently outperform our investors by lending to attractive, growing businesses on terms seeking capital preservation and yield capture

Launch date: Sep-16

Impact Opportunities Equity

It aims to: outperform by investing in companies succeeding in their core purpose – to generate value by creating positive and sustainable change

Launch date: Dec-17

SDG Engagement Equity

It aims to: generate strong investment returns while creating positive impacts on society through engagements focused on the Sustainable Development Goals

Launch date: Dec-17

Unconstrained Credit

It aims to: maximise long-term total returns by combining unconstrained, high-conviction credit selection with a hedge against adverse market conditions

Launch date: Jul-18

European Direct Lending

It aims to: secure yield through long-term lending partnerships

Launch date: May-18

Global Emerging Markets SMID

It aims to: generate attractive long-term capital appreciation by investing in stocks that typically trade within a market capitalisation range of $100m-$14bn

Launch date: Nov-18

Please note:  The value of investments and income from them may go down as well as up, and you may not get back the original amount invested.

Assets under management

Our responsible asset management approach has played an integral role in the growth of our business:

  • Third-party assets under management grew from £7.2bn in 2014 to £22.5bn in 2018.
  • Stewardship assets under advice increased to £389.5bn – achieving more than 153% growth over the last three years.
  • In 2018, we continued to achieve strong growth in revenues, assets under management, stewardship assets under advice and profitability.


Source: Hermes as at 30 September 2019. Performance is USD, net of fees. Benchmark performance provided where available. Past performance is not a reliable indicator of future performance.

Third Party Assets Under Management (£bn)

Source: Hermes Investment Management as at 31 December 2018.

Stewardship assets under advice (£bn)

Source: Hermes Investment Management as at 31 December 2018

Stewardship services expansion

We expanded our stewardship services team, with stewardship offered as a standard practice across all of our asset class offerings. That means fund managers incorporate ESG and the impact of engagement into their investment decisions.

Corporate rebrand

Another fundamental element of our evolution into a third-party asset manager, committed to becoming the world’s leading provider of holistic returns, was our decision to rebrand in September 2014 as Hermes Investment Management (from Hermes Fund Managers).

We modernised our corporate logo to reflect this change.

The new brand became a strong reflection of our business as it stood in 2014 and our ambitions for the future.

Creation of the Responsibility Office

We established the Responsibility Office in 2014 – it was organisationally made pari-passu in eminence to our Investment Office. The Responsibility Office holds all business areas to account for implementing responsibility in their functions and is a full member of all key investment, business development and operational committees. Moreover, it chairs a firm-wide Responsibility Working Group that oversees all internal policies and advocacy positions.

We also have a substantial advocacy programme addressing issues in the investment industry, on stewardship, corporate governance, social and environment issues.

The Hermes Pledge of Responsibility

In 2015, we developed the Hermes Pledge of Responsibility, which provides all staff with an opportunity to express their commitment to always put the interests of our clients and their beneficiaries at the heart of what we do.

Relocation

We moved our headquarters to 150 Cheapside, located in the heart of the City of London, in January 2018. The move reflected our transformation into a fast-growing global business, accommodating our expanding team.

Today, our offices in 150 Cheapside and 33 Gutter Lane are home to 400 members of staff.

While we said goodbye to our home of almost 18 years on the edge of Tower Hamlets, we still remain active in the local community, which we became a part of during that time. We continue to provide support through our charity partnerships with Mosaic, Business in the Community, the East End Community Foundation, as well as our volunteer programmes with local primary and secondary schools.

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  1. 1Source: Federated as at 31 March 2019.