Hermes Pensions Management, the principle investment manager for both the BT and Post Office pension funds in the UK, has agreed to acquire up to a 21% stake in Botts Holdings and invest up to £35m (€56.2m) in its a new fund.

The move comes as pension funds across Europe look to increase their exposure to the continent's burgeoning private equity market. By taking a stake in the Botts management company rather than just investing in the Botts Capital Partners 2 fund, Hermes hopes to maximise its returns from private equity by 3% to 5%. The strategy is commonplace in the US but European investors rarely invest in both the company and its funds.