Hermes Pensions Management, the parent company of one of the UK’s largest pension management groups, and Lens Investment Management, the United States-based investment group, are linking up to create the UK’s first institutionally-backed fund manager with the specific aim of assisting in the improvement of shareholder returns on companies with hidden underlying value. The first fund, ‘Hermes UK Focus Fund’, will be launched in the Summer and will concentrate on mid- to large-capitalisation companies quoted on the London Stock Exchange.

The fund will be managed by a new company, Hermes Lens Asset Management Limited (HLAM), a 75% controlled Hermes joint venture with Lens. HLAM will take a proactive approach to its selected investments and will, wherever possible, work with the identified companies’ management and other shareholders to develop and implement plans that achieve optimal long-term shareholder value. These plans may involve strategic, management or capital changes.

Peter Butler, Corporate Focus Director of Hermes Investment Management and Chief Executive of HLAM, said:-

The Hermes UK Focus Fund will be marketed in the first instance to major institutions in both the UK and US. Initial commitments and indications of further support for a fund in excess of £100 million have already been received.

Hermes will contribute to the joint venture a long and successful investment track record, a leading position in the UK on corporate governance initiatives, as well as the necessary sensitivity to the practices of the UK investment community. Lens Investment Management brings a record of successful active value investment and the involvement of some of the most prominent figures in governance investing in the United States, including Robert Monks, Nell Minow and John Higgins.

Alastair Ross Goobey, Chief Executive of Hermes Pensions Management, commented:-

"Over the last two years Hermes has established a good track record of working with company boards to improve long term prospects. We are confident that our style of constructive, relational shareholder involvement is effective in the UK corporate environment, and we believe that the time is now right to establish a specific fund that formalises our approach in this area.

The investment committee of the new fund will comprise Alastair Ross Goobey, Robert Monks, Chairman of Lens Investment Management, Peter Butler and Steve Brown who will be the joint venture’s Investment Director and is currently Director of UK Equities at Hermes Investment Management Limited.

Lens invests in publicly traded companies that are under-performing the market and their peers, and where it can add value to the investment through appropriate ownership action. In the five years since its formation, Lens has become one of the leading active value investors in the US by applying its approach to some of the greatest names in American industry including Sears Roebuck, Eastman Kodak, Westinghouse, American Express and Scott Paper.

Robert Monks, Chairman, Lens Investment Management, said of the joint venture:-

Robert Monks
Chairman, Lens Investment Management
http://www.lens-inc.com/

Hermes Pensions Management Limited is the parent company of one of the UK’s largest pension management groups, managing schemes with assets of more than £36 billion. In equities it combines both active and passive management techniques to optimise investment performance. It has £16 billion under management in UK equities and its clients hold over 1% of the value of nearly all of the largest 900 quoted companies on the London Stock Exchange.

Lens Investment Management is a pioneer in the area of active value investing in the USA. It has an impressive track record of igniting corporate change and in the 5 years to 31 July 1997 achieved a compounded annual return of 26% which outpaced the return on the S & P 500 despite the extraordinary performance of the market in this period. Lens currently has over $110 million under management.

Hermes UK Focus Fund will be a new UK-based limited partnership that will invest in UK mid- to large-capitalisation companies with hidden value that can be unlocked by a programme of shareholder activism. It will be marketed to major institutional investors initially in the UK and USA. Minimum investment as a limited partnership interest will be £10 million.

HLAM is a private UK company which will be 75% owned by Hermes and 25% by Lens. It will be the General Partner of the Hermes UK Focus Fund which will become formally operational in the Summer upon receipt of all the necessary regulatory approvals. The company is controlled by Hermes Pensions Management Limited.

Alastair Ross Goobey is Chief Executive of Hermes Pensions Management Limited, a nominated member of the Council of Lloyd’s and a director of TR Property Trust plc. He led the successful drive to reduce the length of directors’ contracts between 1993 and 1995 and has positioned Hermes at the forefront of the UK shareholder activism and corporate governance movement.

Peter Butler is Corporate Focus Director of Hermes Investment Management Limited, and will be Chief Executive of Hermes Lens Asset Management Limited. He joined Hermes in 1996, in the new position of Corporate Focus Director, and is responsible for developing Hermes’ role as an active shareholder across its portfolio of investments. He has seven years experience as a PLC Director in executive and non-executive positions, and is recognised as an expert on corporate governance developments in the UK.

Robert Monks is a successful businessman, lawyer, public servant, shareholder activist and author. He founded Lens in 1992 and is a world-respected leader on corporate governance issues. His new book "The Emperor’s Nightingale", to be published in the UK this spring, focuses on restoring the integrity of the business corporation. He was educated at Harvard and Trinity College Cambridge and in 1996 contributed $1 million to launch a Centre for Corporate Leadership and Accountability to concentrate on corporate governance issues at the Judge Institute, Cambridge University.

Steve Brown is Director of UK Equities at Hermes Investment Management Limited and will be Investment Director of Hermes Lens Asset Management Limited. He joined Hermes in 1986 and was Head of UK Smaller Companies between 1988 and 1995. Since March 1995 he has been Director of UK Equities with responsibility for all active UK equity portfolios, with an aggregate value of £3 billion.

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