“We have a target list of 60 client partners globally. We’ve identified strategically which ones we want to work with on the institutional and wholesale side,” Steel said.
“In Asia you have to leverage distributor relationships more than in Europe because of the physical scale of the region. You would need armies of people to reach out to all the allocators, so you have to be more strategic about it.”
In Hong Kong, the firm is talking to local firms about agreements for Hong Kong-domiciled funds.
“We are in conversations with subsidiaries of Chinese asset management companies that we’ll seek to partner with in terms of non-UCITS, Hong Kong-launched funds.”
Likewise in Taiwan, the firm intends to leverage relationships with local distributors.
“Unless you’re deeply resourced as a US or European manager, the partnership is the right way to do it.”
Steel said she chose to build out in Asia instead of entering the US market because of market demand — Asian investors were looking for more global products — and the relative level of market maturity.
“It’s better to be involved with Asia during the early evolution of the market rather than enter a very mature and competitive market like the US.”
In October, Hermes established a Singapore-based Greater China investment team, led by Richard Williams and Mike Curry.
Hermes, which is owned by BT Pension Scheme, the UK’s largest corporate pension scheme, also has institutional clients in Asia Pacific and runs managed accounts for several Australian Superfunds.
Asia fund plans
Two UK funds could be brought into Asia, she said. One is Hermes flagship multiasset inflation fund, launched this month.
“The investment methodology allows us to use any benchmark and customise around that for different risk appetites. So we could create a local inflation benchmark plus 5%, if that’s what the market wanted.”
Another fund, planned for the end of Q1, is a UK residential real estate fund in conjunction with the UK’s largest property lettings company, which provides access to private rental sector blocks.
The firm also has government support to underpin the fund, gaining incentives such as in cheap funding and tax benefits to build housing stock, Steel said.
“It’s not social housing, just ordinary homes. In the UK, there’s a housing shortage with less properties being built anytime since World War Two.
“[Housing] has not been a market that’s been institutionalised, given it’s very fragmented and costly to run when you’re not running at scale.”
Hermes is launching a Jersey unit trust and will launch feeder funds in Asia if there is investor appetite, she said.
“Asian investors are interested in UK real estate access, but investors have typically bought apartments in London.”
In Asia, Hermes will focus mainly on distributing funds in China, Hong Kong, Singapore and Korea. She said the main products will be the flagship global emerging markets, global equities and multi-strategy credit funds.
The firm is also in the queue for an RQFII allocation.
Hermes plans to build out modestly in the region with a handful of new hires. She said the firm works with a small number of strategic clients and distribution partners.
“We’ll never be a retail firm with pictures of portfolio managers on the sides of buses, like you see in the UK.”
