Hermes says it may have to consider European domicile for fund sales

Responsible fund manager considers the implications of Brexit

Hermes Investment Management, the £30.8bn (€34.4bn) responsible investment house that is owned by the BT Pension Scheme, says it may have to consider a European domicile for fund sales given the UK’s withdrawal from the European Union.

Head of Responsibility Leon Kamhi, responding to a question on the disruptive impact of Brexit at a conference yesterday, said: “We may need to have a domicile in Europe to facilitate our ability to sell our funds to European clients, so that’s something we will be thinking about, so we do have some people thinking about what the implications of Brexit might be.”

Kamhi, who also chairs engagement arm Hermes Equity Ownership Services (EOS), added that at present Brexit “hasn’t really had an impact on our day-to-day investing at all, we invest in lots of different countries and we are still able to do that”.

But he did acknowledge that “each fund manager will be thinking about the potential impact of Brexit on the companies they invest in”.

When questioned if Hermes had selected a city for the domicile Kamhi replied “no, not yet”. He was speaking at Bloomberg’s Sustainable Business Summit in London.

Hermes’ funds are run by a Dublin company called Hermes Investment Funds Public Ltd Company, which is chaired by leading Irish funds figure Paul McNaughton, the former rugby star who was founding chair of the Irish Funds Industry Association.A spokesperson for Hermes – which last month won a $400m mandate from Swedish pension giant Första AP-fonden (AP1) — said it is considering a European domicile but that “this is not a result of Brexit”.

The person said: “Hermes has always been open about the fact that we would look to open an office in continental Europe in the future, this would have happened with or without the Brexit vote as it is part of the evolution of our business and the growth we are seeing from clients and prospects in Europe; our third party assets have grown from 18% in 2012 to 68%.”

It comes as the outlook for the BTPS itself is clouded by doubts about its future. This week the Financial Times reported that BT has plans to close its defined benefit pension scheme to 11,000 of its managers amid a “crippling” deficit put at £14bn.

Hermes and the BTPS used to share an address in the City of London financial district, but in May, according to a filing, BT Pension Scheme Trustees Ltd. changed its registered address from Hermes’ Portsoken Street HQ to One America Square a few streets away. A BT spokesperson confirmed it had moved to a “scheme-owned building”. Although deeply in deficit itself, BTPS has had to inject £10m into Hermes to shore up its underfunded pension scheme.

Meanwhile, Hermes has published a white paper, The low carbon opportunity – and the risks of missing out, which looks at how since the Paris Accord on climate change, it has become clear that the agreement has created numerous investment opportunities.