Hermes, the UK asset manager owned by the BT Pension Scheme, is pioneering an approach for measuring the value added by its engagement and activism service.

Fund managers including Hermes, Insight Investment and F&C have launched ownership services that carry out share voting and engagement on behalf of clients whose assets are managed elsewhere. These services allow pension fund clients to allocate money management mandates to a set of managers but separately tap corporate governance specialists to deliver ownership responsibilities. These overlay services have succeeded in attracting clients but identifying the value they add remains a challenge. Hermes works with about 250 companies a year, of which it regards 10% as "strategic engagements" involving meetings with company management and the investment of staff time. It measures the share price performance of the 20 to 30 companies relative to their sector, and provides clients with an analysis of whether Hermes fulfilled its objectives. Based on these measures, Hermes reaches a judgment on the value added by its engagement and charges clients a fee accordingly.