Hermes GPE, a specialist investor in global private equity, has successfully raised circa USD620 million for its co-investment platform.
The Hermes GPE PEC III Co-Investment Fund LP (‘PEC III’) has exceeded its USD300 million target fund size with total commitments of USD389 million raised from a club of global pension funds, professional investors and asset managers. This group includes the State Teachers Retirement System of Ohio, a leading US public sector retirement system, the Local Pensions Partnership, a collaboration between Lancashire County Pension Fund and London Pensions Fund Authority, Canada Pension Plan Investment Board, the global investment management organisation that invests the assets of the Canada Pension Plan, Hostplus, one of Australia’s largest superannuation funds, Ardian, Continental Europe’s leading private investment company, and a number of other UK and Continental European investors.
An additional USD230 million has been committed for sidecar and segregated co-investment mandates by longstanding Hermes GPE clients. These mandates will either invest alongside PEC III, or in separate co-investment and alternative strategies.
The club concept brings together like-minded investors who contribute deal flow from their own private equity relationships alongside opportunities sourced from Hermes GPE’s own extensive global network of GP relationships. PEC III has so far committed USD200m to 30 sectorally diverse, mid-market and growth investments globally. The Fund follows a thematic investment strategy, seeking to identify companies in niche markets or geographies where the growth potential does not hinge on the wider macroeconomic cycle.
The Fund is managed by Hermes GPE which has a 16 year track record in private equity co-investment. The firm was one of the earliest adopters of using co-investments as an integral part of private equity portfolio construction, which it began implementing in 2001. The team has deployed circa USD2.5 billion in 168 co-investment opportunities worldwide, with PEC II, the predecessor club fund, generating net returns of circa 23 per cent IRR and a TVPI of 1.6x, comfortably outperforming vintage top quartile benchmarks at 30 June 2017.
Peter Gale (pictured), Head of Private Equity at Hermes GPE, says: “Our approach to allocating capital where we ‘should’ rather than where we ‘can’ hinges around identifying investment themes which we believe will generate the best growth investment opportunities for our funds and their investors. This is now a well-proven model, offering control over strategy and portfolio construction, with demonstrable ability to enhance investment returns through lower fees and a reduced J curve. In this context, I am delighted to welcome back all of our existing club investors and also to welcome new partners from around the globe who have been drawn together by the material benefits that co-investing brings.”
