Hermes plans aggressive global expansion for “boutique of boutiques”

Saker NusseibehHermes, the investment management arm of the £28 billion ($45 billion) BT Pension Scheme in the UK, is building a ’boutique of boutiques’ via an aggressive expansion plan that includes lifting funds management teams from the private sector, with the aim of selling its alpha expertise to other pension funds globally from January 1, 2010.

Hermes, which remains fully owned by BTPS, currently hires 400 employees mostly in the UK and is looking to expand its investment team to Boston, New York and Hong Kong. It is also building a large distribution team around the globe.

New head of investments Saker Nusseibeh, who took the job in June following Roger Gray’s defection to the Universities Superannuation Scheme, said the manager was looking for de-correlated alpha, and was “open to everything”.

“We are building the proposition of a boutique of boutiques, and will have a very wide offering from long only to hedge funds. This is natural, for example internally we have a first quartile small cap capability regionally, but have never sold it. It is a good fit, we get the best entrepreneurial investment managers and they get our backing and control.”

Hermes has already built a fund of hedge funds boutique, with co-chief investment officers both formerly of Pioneer Alternative Investments, and has a global equities team on the ground in Boston.

Nusseibeh, who has a background in background in the private funds management market working for Morgan Stanley among others, says the fund is not only buying teams, but also individuals, and is close to “landing someone” in Japanese equities and global emerging markets.

He said the first areas of focus will be those that BTPS wants exposure to, but that Hermes also wants to partner with other institutions.

“The key is we are not selling products, we will approach them with opportunities, and will only look at things that will work, the factors of risk are understood,” he said.

“This is a different relationship, we don’t have to sell to clients and are not motivated by sales, fees or profit and loss statements, it is a different relationship. It is so clearly the future, it’s the crossover we’ve been waiting for.”

He said the fund had built the investment platform and would now be building the sales team.

More detail of this approach and Hermes plans will be revealed in next week’s investor profile.