Private equity and private infrastructure manager Hermes GPE wants to make all aspects of the asset classes accessible to clients - at least those willing to take it seriously, CEO Alan MacKay tells Raquel Pichardo-Allison
Alan MacKay, chief executive of private markets investor Hermes GPE has spent his time at the year-old firm combating three myths: The myth that good private equity is inaccessible, the myth that it’s expensive and the perception there’s no room for ESG in the private markets.
Hermes GPE launched one year ago as a joint venture between Hermes, the asset manager owned by the BT Pension Fund, and what was then Gartmore. The firm began life with a solid $6bn in assets under management and 20 clients. It has since grown modestly to $8bn in assets and just over 20 clients. About two thirds of the firm’s assets under management come from pension fund investors.
In the past year, what hasn’t been modest is the firm’s strong message of offering bespoke access to all aspects of private equity and infrastructure markets while challenging traditional fee structures. MacKay has also been vocal about the firm’s commitment to standardising the use of environmental, social and governance factors within private equity.
“We’ve managed to pack in quite a bit of impact in the past year,” said MacKay. “One of the reasons we’ve been able to persuade clients to come with us is we’ve taken a fresh view on private equity. Over the last decade, there was a great perception that it was very difficult to get access to the best private equity funds. Personally I think it was more mythology than reality.”
The firm operates as a bespoke portfolio manager. A pension fund could outsource the management of the private equity portfolio and Hermes will create a portfolio to fit its risk or liability-matching needs. Hermes will, for example, create a portfolio that includes a mix of fund investing and direct investing.
Private equity, said MacKay, has been plagued by an image of exclusivity – that the best funds were hard for investors to access.
“With a handful of exceptions, anyone who wanted to be invested in any of the 5,000 private equity funds globally could just turn up and invest. There’s no access problem now, but there is a complexity issue that exists globally,” he said. “The challenge is all about navigating complexity.”
Private equity
The level of complexity could depend on how private equity is used within a portfolio. There are those who use private equity within their alternative buckets and place it alongside real estate and hedge fund portfolios. But others have begun asking what the role of private equity is within the overall asset allocation.
