The new business will be called Hermes Sourcecap and will give Hermes a core European equities team months after it poached a global equities operation from Fortis.
Sourcecap bosses Andrew Parry and James Rutherford will stay in place as chief executive and chief investment officer respectively.
The BT Pension Scheme will inject £200m into a new European equities vehicle, the firm said, bringing Hermes Sourcecap’s assets under management to more than £670m.
Hermes chief executive Rupert Clarke said: “Sourcecap is a growing business and it’s a business we think we can help to grow.”
Clarke remarked that the disruption in markets since late 2007 had made for a fertile recruiting ground. He said: “It’s thrown up investment teams who otherwise would have remained in place. We’ve managed to attract teams and individuals of a quality we would not have thought possible two years ago.”
Hermes is expected to focus on growing its third party assets in the medium term. It currently runs £5bn of third party money, a sum it wants to increase “significantly”.