(Updates with background to talks)
By Ben Martin and Carolyn Cohn
LONDON, March 1 (Reuters) - U.S. fund manager Federated Investors has entered exclusive talks with Hermes Investment Management about buying a controlling stake in Hermes, sources familiar with the matter said on Thursday.
Hermes, which manages 33 billion pounds ($45.35 billion) in assets, was founded 35 years ago as the in-house manager for the BT Pension Scheme, which is still the firm’s biggest client.
A deal with Federated Investors would see the retirement plan cede control of the business to a U.S. giant that has $398 billion in assets under management.
It comes amid a wave of deal-making that is transforming Britain’s fund management industry, as active asset managers seek to bulk up to offset pressure from passive funds that track indices and charge lower fees.
Last year, Scottish firms Aberdeen Asset Management and Standard Life completed an 11 billion-pound merger, while Britain’s Henderson Global Investors and U.S. rival Janus Capital Group Inc closed their $6 billion tie-up.
Hermes also engages with companies on behalf of clients such as pension funds over governance and sustainability issues. This part of the business has 336 billion pounds in assets under advice.
Hermes also drew interest from suitors including U.S. firm Eaton Vance and Australian fund manager Challenger , one of the sources said.
Spokespeople for Hermes, Federated Investors and Eaton Vance declined to comment, while Challenger could not be reached. ($1 = 0.7276 pounds) (Additional reporting by Simon Jessop, editing by Jane Merriman, Larry King)