Hermes on the Lookout for Long-Term Institutional Investors

Hermes opens its three commodities funds.

(March 4, 2010) – Hermes Fund Managers Ltd. is seeking institutional investors for its three commodities funds as part of its strategy to raise assets.

The Hermes Commodities Alpha, Index and Index Plus funds, which have generated returns above their benchmarks from inception, manage approximately $1.5 billion, mostly for the BT Pension Scheme, Bloomberg reported.

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“Adding commodity exposure to a pension scheme’s strategic asset allocation can provide significant diversification benefits through low correlation with other asset classes,” said Colin O’Shea, head of Hermes Commodities, in a news release. “Overall pension scheme risk can be lowered by adding commodities without a reduction in return expectations,” adding that commodities would help hedge against rising inflation and risk.

Hermes Commodities, led by Colin O’Shea, Jason Lejonvarn and David Hemming, is one of the largest fund long-only commodities managers, according to a news release. The team expects their first external investments in late March.

O’Shea continued, “We bring a successful, four year track record to market combined with the experience of a large European pension scheme and its strong governance culture: A compelling solution for pension schemes and their trustees.”

London-based Hermes invests assets on behalf of about 180 clients and has more than $37 billion under management, as of December 31. Hermes is wholly owned by the BT Pension scheme, the UK’s largest funded pension scheme.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

PIMCO Exec Mohamed El-Erian Discusses Key Issues in 2010

El-Erian told reporters: "We will go through a bumpy journey to get to this new normal and we do not how long it will last."

(March 3, 2010) — At an annual conference of Allianz Global Investors (AGI) in London, Pacific Investment Management Co. (PIMCO) chief executive Mohamed El-Erian discussed the major issues of 2010.

 

He expressed a shift in the approach to traditional liability driven investment (LDI) strategies, according to Global Pensions.

 

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“Indices traditionally used to construct portfolios matching pension funds liabilities are snapshots of the past,” said El-Erian at the conference, Global Pensions reported . “Schemes are now increasingly looking at including forward looking indices, but also at introducing active elements in their LDI approaches.”

 

He added that pension funds must embrace “smart passive” LDI strategies as part of a broader process of “resetting [of the global economy] into a new normal.”

 

Additionally, El-Erian said sovereign risk is a major issue in 2010. He asserted that asset managers must devote attention to the global gross domestic product (GDP), adding that the UK would likely more easily handle its debt burden than Greece and other euro-zone members. While 5% of countries in the world had a GDP deficit above 10% in 2008, the percentage grew to 46% in 2010, according to Reuters.

 

PIMCO, which oversees about $985 billion, is the world’s largest bond fund. In 2009, it added nearly $280 billion in assets, a 40% increase from the previous year. According to AGI, PIMCO’s parent company, PIMCO has increased its assets by an average of 17% each year since 2002.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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