Royal Mail shortlists six for £300m job

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Royal Mail shortlists six for £300m job

26/03/10 10:23 am By Laura Chesters

Royal Mail Pension Plan (RMPP) is for the first time considering whether to offer a UK property mandate to a manager other than Hermes, which it co-founded 27 years ago.

RMPP, the UK’s fourth-largest pension fund, has rounded up a “beauty parade” of property fund managers. Up for grabs is a mandate worth £300m.

A shortlist of six fund managers is understood to have been drawn up. In addition to Hermes, CB Richard Ellis Investors, Legal & General Property, Prupim, La Salle Investment Management and Aviva Investors are thought to be among those interested.

RMPP is being advised by Mercer Investment Consulting.

If Hermes is not appointed, it could pave the way for RMPP to appoint new fund managers for the bulk of its £1.6bn property holdings, which are managed at present by Hermes.

Hermes was set up to manage the pensions of the Post Office and British Telecom in 1983, when it was called PosTel. In 1995, the BT Pension Scheme bought the 50% holding in PosTel owned by the Post Office, and PosTel’s name was changed to Hermes.

The decision to offer the mandate to outside parties follows criticism that RMPP has failed to respond to falling values and a rising deficit.

It has been under severe pressure since the end of 2008, when it emerged that it faced a deficit of between £8bn and £9bn.

The government had considered taking over most of RMPP’s assets, including gilts, equities, properties and cash as part of its now-aborted plan to part-privatise Royal Mail.

The pensions of retired Royal Mail employees are paid out of RMPP, which is why the growing deficit in the scheme is such a concern.

Rupert Clarke, previously head of Hermes Real Estate, stepped up to chief executive of Hermes in 2008. Since then he has split its two functions: the asset management business that runs funds for a range of clients and the team advising the BT Pension Scheme.

Hermes, Royal Mail and Mercer declined to comment.