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"Hermes set up its own private equity operation for a number of reasons," said Selkirk. In the 1990s, Hermes, wholly owned by the BT Pension Fund, had no exposure to the asset class when the collapse of listed equity values in 2000 obliged them to look for alternative sources of return. "From
Rod Selkirk
"Hermes set up its own private equity operation for a number of reasons," said Selkirk. In the 1990s, Hermes, wholly owned by the BT Pension Fund, had no exposure to the asset class when the collapse of listed equity values in 2000 obliged them to look for alternative sources of return. "From 2000, before I joined, we were investing only as limited partners," he recalled. Investing this way facilitates rapid portfolio diversification by manager and deal size. It also adds layers of cost. Depending on how much capital the investor has, this route may remain the most efficient means of getting exposure to large buy-outs and non-domestic private equity markets. But Hermes is a large enough investor to afford direct exposure to mid market buy-outs in the U.K. market, "which is where we operate," he added. It has directly invested GBP125 million across five buy-outs since 2003. Meanwhile, Hermes also manages third-party pension assets. "And yes,...