What we do

Co-investments at our core

Offering investors an ‘intelligent’ approach to portfolio construction

Introducing a dedicated co-investment allocation alongside primary funds can enhance overall PE returns. Money is put to work faster, with greater control, and at a potentially lower cost. But it’s often challenging for LPs to successfully implement themselves. Enter Hermes GPE.

We were early adopters of using co-investments as an integral part of PE portfolio construction. Since 2001 the team has built up specialist expertise, deploying over $3bn to more than 200 global investments  on behalf of our LP investors.

We put a lot of emphasis on careful forward-looking portfolio construction – we stock pick – and underpin that with high quality analysis and insight. This enables us to allocate capital to where we see the most attractive opportunities: investing where we ‘should’ rather than where we ‘can’.

$3.0bn

Committed to over 200 co-investments over 18 years*

* as at 31/03/19

Co-investments by geography*

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* as at 31/03/19

Co-investments by size**

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** as at 31/03/19, deals from 2010

Our approach

Combining forward-looking insight with a highly disciplined investment process

Our highly experienced team are adept at identifying investment opportunities – using an evidence-based approach to plan ahead with confidence. We have identified five key megatrends that we believe will reshape global economic activity over the next 10-20 years. They are set to have a profound long-term economic and social impact.

These megatrends will drive the growth of certain companies in niche sectors regardless of economic cycles. It’s these fast growing, noncyclical businesses in the Americas, Europe, Africa, Developed and Developing Asia, which are our investment targets.

Within the megatrends we look for investable growth themes, and then drill down to the sectors most likely to benefit in order to find companies capable of generating sustainable long-term alpha.

Although we are skilled investors, we don’t simply rely on our instincts. All investment opportunities are subjected to our rigorous, systematic investment process which we have developed over many years. This approach – and our dynamic investment strategy – allows us to deliver sustainable returns for our investors.

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Investment characteristics

Strong focus on global mid-market growth

The majority of companies we back – around 70% – have an enterprise value of less than $500m, and all have distinctive investment characteristics which we categorise into three investment theses Core, Growth and Value. Currently our co-investment portfolios have a particular focus on growth buyouts and small/mid-sized niche buyouts in our target sectors.

Growth

Characteristics

Very strong top line growth opportunities.

Significant EBITDA uplift and margin improvements.

Innovative or disruptive business, typically scalable and asset light.

Type of deal
Growth equity
Growth buyout

Core

Characteristics

Established business models.

Stable and defensive market exposure.

Strong cash generation and potential for operational improvements.

Type of deal
Larger traditional buyout
Small/mid-sized niche buyout

Value

Characteristics

Assets undergoing strategic or operational transformation.

Pricing dislocation leads to good opportunity for outsized return.

Type of deal
Strategic transformation
Turnaround/special situations

The co-investment portfolio

Our portfolio of fast growing companies is well diversified by geography and sector

Working in conjunction with GP partners around the globe, our co-investments span a wide range of sectors within our megatrend framework.

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Fund investing

Backing funds that think like we do

Over the last 27 years we have invested $7bn in more than 260 funds. Today, fund selection closely follows the key themes we have identified, with a particular focus on growth and emerging GPs around the globe.

Fund selection follows our thematic approach, with a particular focus on growth and emerging GPs.

We form close relationships with the GPs we back, often initially via a co-investment relationship. This gives us valuable insight into the experience of the team and how value is created.

For LPs where we have fund mandates, typically fund investing forms part of an innovative 50/50 investment model that optimises their PE exposure. This is achieved by combining globally sourced co investments with commitments to primary funds. This model can generate complimentary and superior returns to a primary-only approach.

Niche investment strategies

Meeting specialist needs

Sometimes investors value more specialised options. Alongside our co-investment and fund investing programs, we work with LPs to develop niche investment strategies to meet very particular requirements. These range from funds with a sustainable and technological focus to bespoke secondary portfolios.

In line with our focus on growth investing, we have identified attractive opportunities to invest in high growth European companies at the scale-up stage of development. In the main, these are companies with established business model and increasing commercial traction but limited access to the capital that helps them become market leaders.

We believe that our combined fund and co-investment strategy coupled with our investment expertise can help close that funding gap in a commercial and impactful way.

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How can we help you?

We would be very interested to learn how our style of partnership investing resonates with you. If you are an LP looking for a partner to help you maximise your PE allocation, or a GP seeking a responsive and experienced investment partner, or you simply want to know more about Hermes GPE, please get in touch.

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