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Insight - Q4 2017

Latest perspectives and firm updates for the institutional community

Home / Insight Newsletter Q4 2017

It is hard to imagine we are now ten years on from the start of what transpired to be the Global Financial Crisis and thirty years on from Black Friday, yet equity markets have returned to new highs and bond yields to all-time lows. So what has changed?

One thing that has certainly changed is how much impact our investment decisions are having on the environment and society around us. Across the world, the question being asked by clients is no longer “Why should we include ESG into our strategy?” but “Why shouldn’t we include ESG?”, many clients are now actively seeking ways to responsibly invest their assets in addition to seeking return. We are very much embracing this dialogue at Hermes and welcome the opportunity to discuss ESG integration and Impact Investing approaches with clients. 

Latest insights

Macro Economics

The missing link: why ESG should be in investors’ risk DNA

Risk morphs, and investment strategies must evolve in response. We…

Learn more
Macro Economics

The impact of ECB tapering on European markets

Learn more
Emerging Markets

Imitator turned innovator: Technological change in China

Learn more
Macro Economics

Macro Watch: Italian budget showdown; EU leaders brace for Brexit summit; UK jobless rate at 43-year low

Learn more

Updates

Business Update

hermes-aum-chart-september-2017

  • The Hermes GPE PEC III Co-Investment Fund LP (‘PEC III’) has exceeded its $300m target fund size with total commitments of $389m raised from a club of global pension funds, professional investors and asset managers. An additional $230m has been committed for sidecar and segregated co-investment mandates by longstanding Hermes GPE clients.  These mandates will either invest alongside PEC III, or in separate co-investment and alternative strategies
  • Hermes Investment Management is delighted to announce it will be moving its headquarters to 150 Cheapside in January 2018. Based in the heart of the City, and totalling 46,000 square feet, 150 Cheapside will now be home to 400 members of staff.

Please note the total AUM figure includes £6.0bn/US$8.0bn/€6.8bn of assets managed or under an advisory agreement by Hermes GPE LLP (“HGPE”), a joint venture between Hermes Fund Managers Limited ("HFM") and GPE Partner Limited. HGPE is an independent entity and not part of the Hermes group. £76.3m/US$102.4m/€86.6m of total group AUM figure represents HFM mandates under advice. Source: Hermes as at 30 September 2017 with the exception of two portfolios totalling £12.5m/US$16.8m/€14.2m valued as at 30 June 2017.

People

  • Andrew Parry will be taking on a new role as Head of Sustainable Investing with immediate effect. He will be working with the Corporate Strategy Group and across the business to deliver a commercially attractive range of sustainability, ESG and impact strategies, also acting as our lead spokesperson for this aspect of our business.
  • Silvia Dall’Angelo joined Hermes Investment management as a senior economist. As an experienced global economist, she will be responsible for providing macroeconomic analysis and commentary, non-standard macroeconomic modelling and develop relationships with key central banks and monetary authorities. Silvia joins from Prologue Capital.

Stewardship

  • Hermes Investment Management has joined the United Nations Global Compact, the world’s largest corporate sustainability initiative. The United Nations Global Compact is a call to companies everywhere to align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues embodied in the Sustainable Development Goals.

Performance

Hermes Performance to end of September 2017

  Three months One year Three years Five years Since inception
High Active Share Equities
Asia ex Japan (Inception: 01/01/10, USD) 7.65 30.84 14.11 16.82 16.09
Benchmark (MSCI AC Asia ex Japan IMI) 6.33 21.22 7.12 7.13 6.05
Relative 1.32 9.62 6.99 9.68 10.04
           
Global Emerging Markets (Team inception: 30/06/11, USD) 9.28 31.56 11.44 10.13 7.01*
Benchmark (MSCI Emerging Markets IMI) 7.74 21.86 5.03 4.41 1.90
Relative 1.54 9.71 6.41 5.72 5.11
           
Global Equity Core (Inception: 01/12/07, USD) 5.80 20.78 9.30 12.92 6.07
Benchmark (MSCI Developed World) 4.84 18.17 7.69 10.99 4.57
Relative 0.96 2.62 1.61 1.93 1.50
           
Hermes Global Equity Screened ESG (customised exclusion list) (Inception: 01/09/12, USD) 5.16 18.91 8.96 12.78 13.17
Benchmark (MSCI World) 4.84 18.17 7.69 10.99 11.39
Relative 0.32 0.74 1.27 1.79 1.78
           
Hermes Global Equity ESG (best ideas) (Inception: 01/05/13, USD) 5.67 20.46 9.56 11.31
Benchmark (MSCI ACWI) 5.18 18.65 7.43 8.64
Relative 0.48 1.82 2.13 2.67
           
European Alpha (Inception: 14/06/07, EUR) 1.04 12.54 8.77 10.33 5.43
Benchmark (FTSE All World Europe) 2.93 17.02 7.40 10.60 2.93
Relative -1.89 -4.48 1.37 -0.27 2.49
           
Europe Ex-UK (Inception: 08/08/08, EUR) 5.30 22.52 13.74 13.98 10.30
Benchmark (FTSE World Europe Ex UK TR) 3.24 20.47 9.10 12.59 6.82
Relative 2.06 2.05 4.65 1.39 3.48
           
Eurozone (Inception: 01/08/13, EUR) 2.87 17.91 12.79 12.07
Benchmark (MSCI EMU) 4.30 22.17 8.97 10.69
Relative -1.43 -4.26 3.82 1.38
           
US SMID (Team inception: 28/02/09, USD) 1.64 11.78 11.35 15.17 20.53*
Benchmark (Russell 2500) 4.74 17.79 10.60 13.86 19.07
Relative -3.10 -6.02 0.75 1.31 1.45
           
Global Small Cap (Inception: 01/07/11, USD) 5.33 19.37 10.20 13.54 11.93
Benchmark (MSCI World Small Cap Index) 6.33 20.29 10.89 13.35 10.23
Relative -1.00 -0.92 -0.68 0.19 1.70
           
Hermes US All Cap (Inception: 01/06/15, USD) 2.49 15.11 10.17
Benchmark (Russell 3000 Index) 4.43 18.03 9.19
Relative -1.94 -2.93 0.98

*Team inception
Source: Hermes as at 30 September 2017. Performance shown is in base currency, gross of fees. Returns over one year are annualised. Relative returns are calculated on an arithmetic basis. Past Performance is no indicator of future results.

Hermes Performance to end of September 2017

  Three months One year Three years Five years Since inception
Specialist Fixed Income
Global High Yield Bonds
(Inception: 01/06/10, EUR)
1.96 8.36 5.09 7.07 8.54
Benchmark (Merrill Lynch Global High Yield
Constrained (euro hedged))
1.66 7.10 4.60 5.55 7.39
Relative 0.30 1.26 0.49 1.52  1.15
           
Multi Strategy Credit
(Inception: 01/06/13, USD)
1.20 6.73 5.41 6.20
Benchmark (N/A)
Relative (N/A)
           
Hermes Absolute Return Credit
(Inception: 01/06/15, USD)
0.74 3.98 2.82
Benchmark (N/A)
Relative (N/A)
           
Global Investment Grade Bonds
(Inception: 01/07/10, GBP)
1.20 2.68 4.53 4.34 5.46
Benchmark (Merrill Lynch Global Broad
Market Corporate excluding sub-Financial
100% Hedged GBP)
0.97 1.10 3.69 3.66 4.79
Relative 0.23 1.58 0.84 0.68 0.67

*Team inception
Source: Hermes as at 30 September 2017. Performance shown is in base currency, gross of fees. Returns over one year are annualised. Relative returns are calculated on an arithmetic basis. Past Performance is no indicator of future results.

Hermes Performance to end of September 2017

Hermes Infrastructure

Manage £4.2 billion* across a managed account programme, segregated accounts and a pooled vehicle

Performance p.a. since inception at 31 March 2017  
Hermes Infrastructure Fund I 12.1%
UK Retail Price Index 2.4%
FTSE 100 Total Return Index in GBP 9.1%
Macquarie Global Infrastructure Index 100 (GBP) (TR) n/a**

*As at 30 June 2017. AUM includes NAV plus unfunded commitments.
Source: Hermes Infrastructure, Bloomberg. Performance as at 30 June 2017 since inception of HIF I (21 December 2011) net of underlying manager fees, gross of Hermes Infrastructure fees. Past performance is no guarantee of future results. Returns over one year are annualised.
**The Macquarie Global Infrastructure Fund Index was discontinued in May 2017

Hermes GPE

Private equity fund investment

  • 25 year fund track record (1992–2017)
  • $6.8bn committed in 247 funds with 152 GPs worldwide, generating returns of 1.6x and 12.9% IRR2,3

Private equity co-investment

  • 16 years track record (2001–2017)2
  • $2.5bn committed to 172 private equity co-investments with 84 GPs worldwide2
  • Gross 1.9x and 25.2% IRR1 on 69 realised investments2

1 AUM data as at 30 June 2017. AUM includes NAV plus undrawn commitments.
2 As at 30 June 2017.
3 Net of all underlying GP fees. Based on USD metrics. Past performance is no guarantee of future results.

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UK Institutional Contact Information

Mark Miller + 44 (0)20 7680 2205 mark.miller@hermes-investment.com
Consultant Relations

Doug Anderson

Tom Rutter

+ 44 (0)20 7702 6127

+ 44 (0)20 7680 2346

douglas.anderson@hermes-investment.com

tom.rutter@hermes-investment.com

Business Development

James Lucas

Siman Thind

+ 44 (0)20 7702 6169

+ 44 (0)20 7680 3741

james.lucas@hermes-investment.com

siman.thind@hermes-investment.com

Client Relationship Management

Gareth Davies

Anna Roberts

+ 44 (0)20 7680 2136

+ 44 (0)20 680 2222

gareth.davies@hermes-investment.com

anna.roberts@hermes-investment.com