Hermes closes infra fund on £1.16bn

The UK asset manager, which recently teamed up with Canadian institutions to invest in two high-profile assets, has enlisted strong support from corporate and local government pensions.

Hermes Infrastructure, the infrastructure investment arm of UK asset manager Hermes Investment Management, has raised £1.16 billion (€1.60 billion; $1.82 billion) for its Infrastructure Fund and related accounts.

The vehicle itself has garnered a total of £1.0 billion, beating its original target of £800 million. The final close comes six months after Infrastructure Investor revealed that the fund, having already collected more than it was initially aiming for, was progressing towards its hard cap of more than £1 billion.

The vehicle counts 18 limited partners (LPs), with a majority of European corporate pension funds (which represent 60 percent of the money raised). Alongside them came six UK local government pension schemes (LGPS), which account for 30 percent of the capital pooled, and foundations, which make up 10 percent.

“As one of only a few UK-based and UK-focused direct infrastructure investors, HIF offers exposure to high quality UK infrastructure assets which can deliver excellent investment characteristics for institutional investors. We will look to continue to target long-term stable, inflation linked infrastructure investments for our clients,” commented Peter Hofbauer, head of Hermes Infrastructure, in a statement.

According to the firm, the final close was reached after certain early-stage investors topped up their initial commitments to the fund – including the London Borough of Barking and Dagenham Pension Fund (LBBD) – and nine new LPs decided to join them.

“We invest in infrastructure to diversify our portfolio and gain access to long term, stable cash flows that help match our pension liabilities,” said Jonathan Hunt, chief financial officer of LBBD.

“LBBD was an early investor in HIF in 2012 and increased its commitment at the final close on the back of strong performance to date. An additional attraction of this particular fund has been the pooling arrangement in place for LGPS investors, which allows us to achieve meaningful fee discounts on a collective basis.”

Hermes Infrastructure now manages total assets worth £3.1 billion, including a £2 billion direct investment managed account programme for the BT Pension Scheme. Its portfolio includes 13 investments spanning the renewable, utilities, ports and transport sectors, as well as four infrastructure fund commitments.

High profile transactions recently announced by the firm include the acquisition of a 40 percent stake in high-speed rail operator Eurostar, for which it is poised to pay up to £585.1 million jointly with Canadian pension La Caisse de dépôt et placement du Québec, and the purchase of a 30 percent holding in Associated British Ports, for which it is due to disburse £1.6 billion together with Toronto-based Canada Pension Plan Investment Board.

Announced in March, both deals are expected to complete by mid-2015.