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Money Management

BT Pension Scheme is said to consider sale of money manager Hermes

A BT logo sits on a wall outside the headquarters of BT Group Plc in London, U.K., on Monday, Dec. 15, 2014. BT started exclusive talks to acquire Deutsche Telekom AG and Orange SA’s British wireless venture EE for 12.5 billion pounds ($19.6 billion), moving ahead with a deal that’s set to spur more mergers in the U.K. telecommunications market. Photographer: Jason Alden/Bloomberg

BT Pension Scheme, London, is considering a potential sale of Hermes Fund Managers, which oversees money for the retirement plan's members as well as external clients, according to people with knowledge of the matter.

The plans are at an early stage and the pension fund has yet to appoint banks to look for potential suitors, the people said, asking not to be identified because the discussions are private. The deliberations may not lead to a sale, they said. A representative for BT Pension Scheme and Hermes declined to comment.

Hermes has been managing money for the £48.7 billion ($64.9 billion) BT Pension Scheme since 1983, a year before the company that would eventually become BT Group PLC was privatized. It started investing for other clients more recently and manages about £30.8 billion in assets, according to its website.

Active fund managers face an unprecedented assault on their revenue streams as investors shift to cheaper passive funds. The industry has already seen a flurry of deal activity as competitors joined forces to manage the structural changes that threaten profit margins. BT's pension fund pulled an £8.4 billion government bond investment mandate from Hermes about two years ago to allocate the deal to cheaper tracker funds.

Hermes manages money for more than 470 clients globally, and in addition to public securities is involved in private markets including real estate, according to its website. It got involved in the redevelopment around the rail hub of King's Cross in London and has invested in Eurostar and Associated British Ports.