Hermes third party assets grow by £5bn in 2016

Hermes Investment Management has reported growth of nearly £5bn in third party assets between 2015 and 2016 as it sees strong inflows from international investors.

In its annual report, published today, the firm says assets under management and advice have increased by £5.5bn to £28.5bn mainly driven by a boost in third-party assets of £4.7bn.

Third-party assets now make nearly 60 per cent of the firm’s total revenue, an increase from 52 per cent in 2015. Meanwhile, assets under stewardship almost doubled to £261.3bn from £154.7bn in 2015.

Head of business development Harriet Steel recently told Fund Strategy the firm plans to double assets in the next five years mainly organically and by enhancing Hermes’ ESG mandate.

The Global Equity ESG strategy underperformed its benchmark by 1.3 per cent in 2016, but the firm says annualised relative return remains 3 per cent above benchmark since inception.

However, the core Global Equity and Screened ESG strategies both exceeded their benchmarks by 1.8 per cent.

Global equity strategies raised over £1bn, while the European equities saw outflows for the period though, following two years of strong inflows. The firm says outflows might continue to prove challenging in 2017 because of political and economic challenges across Europe.

Alternative strategies boosted assets with net inflows of £3bn over the past year.

Hermes says inflows led to a rise in underlying profits to £15.5m for the year, from £11.7m in the previous year.

However, pre-tax statutory profits declined to £10.5m from £14.6m due to non-recurring performance fees within the BTPS portfolio, the firm says.

Flows as well as currency and market movements also brought revenue up to £111.8m, from £105.6m in 2015.

Hermes Investment Management chief executive Saker Nusseibeh: “Over the past five years, we have transformed Hermes from an inwardly focused asset manager to a successful third party business with our clients’ outcomes at the very centre. This required a long-term vision and commitment to create a sustainable firm focused on creating long-term holistic returns for all stakeholders.”

Steel adds: “Our focus on offering clients access to alternative sources of yield and high quality growth opportunities in public and private markets is proving attractive and last year we saw strong net inflows of £3bn from investors around the world.

“In addition, the desire from asset owners for active engagement with the companies in their portfolios has led to the rapid growth of our stewardship business, Hermes EOS, with assets under advice rising by more than £100 billion during the year.”