BT Pension Plan, with £29 billion ($40 billion) in assets, and Consignia Pension Plan, with £16 billion, committed up to £150 million and £28 million, respectively, to a new activist shareholder fund being set up jointly by Relational Investors and Hermes Focus Asset Management. BT owns Hermes.
This is the first time both pension plans have adopted a shareholder activism approach toward U.S. companies. The fund will invest in underperforming U.S. companies to engage with management and improve share price performance, said David Pitt-Watson, Hermes Focus managing director. Current holdings include Mattel Inc., he said. The plans, both based in London, already invest in similar funds managed by Hermes in the United Kingdom and Europe.
Hermes and Relational currently are raising money for the fund, which they expect to reach $1 billion in assets under management when it launches within the next 12 months. According to Ralph Whitworth, Relational principal, the fund has commitments totaling $550 million; he would not give further details.
Mr. Whitworth said Hermes will enable Relational to reach international client prospects, which it couldnt easily do because of its small staff. Mr. Pitt-Watson said Hermes was attracted to Relational because of it has a similar investment approach to Hermes, using corporate governance and activism to improve shareholder value. Relational invests in U.S. companies, while Hermes invests in Europe.
Relational wont market Hermes investment management. Although the relationship could be broadened to other areas, they said no other joint activity is planned.