Federated Hermes Investors is sharpening its focus on the Asia Pacific region, with the establishment of a subsidiary in Sydney, with a new head of distribution for Australia and New Zealand, and the recruitment of two new sales directors for its Singapore office. New strategies from US parent Federated Investors are expected to follow.
Federated Hermes reflects the integration of the operations of the former UK-based Hermes Investment Management, well known in Australasia, and its majority owner, the former Federated Investors, a New York listed manager which has also changed its name, and stock market ticker, to Federated Hermes Investors. Federated Investors paid Stg 262 million (A$480.7 million, under current exchange rates) in 2018 for 60 per cent of Hermes owned by the British Telecom Pension Scheme, which had started the business for its outsourced funds management purposes. The pension fund has retained 29.5 per cent and the former Hermes management 10.5 per cent. The pension fund has also remained the firm’s largest client.
While Federated Investors had little international presence, it also has a long and interesting history, being spun out of the Aetna insurance company through a management buyout followed by IPO. The two things which particularly appealed to the US manager about Hermes, according to Harriet Steel, were the firm’s strong ESG capabilities, which permeate everything the manager does, and its international reach.
Steel, who joined Hermes in 2011, is the head of international business development (excluding the US). She said last week (October 22) from London that the region would be seeing some new strategies from the combined entity. An example of one of Federated’s strengths is in money market funds and strategies, which could be offered in Europe and Asia.
For the former Hermes team, it means that they are now a part of a larger and stronger group to support a broader range of products, while Federated benefits from diversification of its investment platform. Steel said: “Leadership and stewardship are also very important. They recognised that we had best practice and a key strategic objective was to integrate that within their processes.”
The combined business has US$630 billion under management and US$1.1 trillion under advice. At the time of the Hermes purchase the UK firm had US$65.4 billion under management. The ‘under advice’ figure consists of a range of stewardship services, such as shareholder engagement with big corporates, proxy voting and consulting through a ‘responsibility office’ which offers ESG advice to clients on matters such as policy and regulation.
That arm has a team of about 50. “It’s one of the biggest teams globally,” Steel said. “We’ve seen a massive increase in interest in Europe. There are also a number of engagement clients, with some on our advisory board… Our objective is to effect material change.”
The firm’s investment analysts often attended the same meetings with corporates as their ‘engagement’ colleagues, which helped both because the two groups of people tended to ask different sorts of questions, she said. Nothing that was ventured by the company management was undisclosed information not already available to the market, so there was no need for a Chinese wall between the two.
The Hermes representation in Australia and New Zealand has been through third-party marketer Ian Manton-Hall since 2015 and before that through a Sydney office which he set up when he was an employee of Hermes, starting in 2010. Gary Horton, most recently the head of institutional business at Janus Henderson in Sydney, is the new head of distribution for Australia and New Zealand, reporting to Singapore-based Jakob Nilsson, the head of distribution for Asia Pacific. Federated Hermes said in a statement that Manton-Hall would continue to play an important client role for the firm, working closely with Horton.
The two new sales directors in Singapore are Alex Ng and Mark Coppell. Ng joins as head of wholesale distribution, Asia in a new role which reflected increased interest in sustainable investment products from wholesale clients, the firm said. Mark Coppell, who previously worked for Federated Investors distributing product to UK, European and middle eastern markets, will focus on the firm’s global liquidity product offering. Both also report to Jakob Nilsson, who became a director of Federated Investors Australia Services Ltd last month.