UK pensions manager, Hermes Pensions Management has struck out once again on the corporate governance note, by creating the UK's first institutionally-backed fund manager whose investments will specifically target under performing companies which are in need of guidance on how to im-prove their shareholder value.

Hermes has teamed up with US manager Lens Investment Management to form Hermes Lens Asset Management (HLAM), 75% owned by Hermes, which will be launching its first fund later this year.Lens Investment Management is one of the leading active value investors in the US, specialising in investing in under performing public companies.

The Hermes UK Focus Fund will invest in mid to large cap stocks listed on the London Stock Ex-change and is hoping to raise over £100m ($167m) initially from UK and US institutional investors. The fund's objective is to stimulate change in companies in the top 350 with hidden shareholder value," says Peter Butler, corporate focus director of Hermes and CEO of newly-created HLAM. HLAM aims to work with some of the companies it will actually be investing in, in order to develop plans that will achieve this value. "We are not interested in micro-managing businesses," says Butler, "But our aim will be wherever possible, to support management in the pursuit of improving long term shareholder returns."

The creation of HLAM follows soon after Hermes' involvement in the sacking of the Foreign & Colonial-dominated board of directors of the Brazit fund, which in turn prompted the Association of In-vestment Trust Companies' decision to block fund managers from chairing the boards of client investment trusts in the UK."