Hermes hedge fund unit seeks 5 bln stg in 5 yrs

* Hermes BPK fund of funds targets 3rd party pension schemes * CEO chairs committee to boost ties with underlying funds

By Cecilia Valente

LONDON Oct 13 (Reuters) - Hermes BPK Partners, the fund of hedge funds linked to Britain's largest pension scheme, wants to bring in 5 billion pounds ($7.89 billion) in assets within the next five years, the firm's CEO said on Tuesday.

Hermes BPK currently manages about $1.3 billion for the BT Pension Scheme (BTPS), its only client. Matteo Dante Perruccio told Reuters the boutique firm now wants to attract new assets from other corporate and local authority pension funds.

"We see hedge fund managers getting inflows from predominantly institutional investors -- the most sophisticated ones with the ability to invest directly. Those who do not we are seeing express interest in funds of hedge funds. We see general interest again," Perruccio said on the sidelines of the on the sidelines of the Local Government Pension Investment Forum 2009 here.

"We have a target to get to 5 billion pounds in five years," he said.

Funds of hedge funds took a hit last year as the credit crisis and the Madoff scandal dented investor confidence in the model and the additional fees it attracts. However, Perruccio believes the case can still be made for this type of investment.

"Many institutional investors are recognising the value of funds of funds -- done properly," he said.

Perruccio, a founder of Hermes BPK, also chairs a new committee of fund of hedge fund managers, which aims to improve links with the underlying hedge funds in their portfolios.

Hermes BPK is a partnership between its managers and Hermes, the asset management company wholly-owned by 30-billion-pound BTPS. Hermes is increasingly seeking to sell its investment products and services to third parties.

The BTPS fund of hedge funds' investments are split between a restructuring opportunity mandate, including distressed credit and a diversified low-volatility mandate.

Rising markets and a fifth straight month of client inflows pushed hedge fund assets close to $2 trillion in September, according to research firm HedgeFund.net. [ID:nN08538003] (Editing by Joel Dimmock and Karen Foster) ($1=.6334 Pound)