Could the Janus Henderson merger ‘unsettle’ fund managers?


The funds industry has warned the £4.7bn merger between Janus Capital and Henderson Global Investors could “unsettle” fund managers as the mid-scale asset managers seek synergies.

The combined business is expecting to generate annual cost savings of at least $110m. It will have around 2,300 employees based in 29 locations.

Henderson chief executive Andrew Formica says in the “vast” majority of cases teams are complementary, but in a deal of this size there would be synergies to be found. However, Formica says the company would not be commenting on those changes at this stage.

Hargreaves Lansdown head of investment research Mark Dampier says in the short term investors have little to worry about as it will be “business as usual”.

Scale can help keep costs down for fund groups, allowing them to offer more competitive fund pricing, while still delivering good active performance.

The fund management industry is polarising, with the likes of Henderson and Janus seeing the benefits of scale at one end, and smaller boutique fund management groups focusing on niche propositions at the other. Those in the middle will need to be on their game to keep up.”

But Dampier adds: “Generally I’m not a huge fan of mergers as it can unsettle fund managers, and we will be monitoring the situation closely on behalf of our clients.”

Dampier says this is because the “pecking order” can be upset. “[Janus Capital’s] Bill Gross is one of the biggest names in fixed income so it will be interesting to see what synergies can be found on the UK side.”

“It’s a seemingly straightforward merger without too many competing fund managers, but where you’ve got competing fund managers and where you’re trying to reduce costs then fund managers start to think ‘well, have I got a job?’ Headhunters always go in around then,” Dampier says.

He notes that Henderson Global Investors has the higher proportion of outperformance.

Dampier questioned whether UK-based employees would be unhappy with stock no longer being listed on the London Stock Exchange, which he says was surprising due to London-based Henderson accounting for 57 per cent of shares.

City Financial investment director Peter Toogood says: “Henderson was always very offshore anyway. They’re a UK institution, they’re well known, but their UK asset base isn’t overly substantial.”

Toogood reckons Brexit could have also have impacted the companies’ decision not to list in the UK.

However, Toogood says where it’s listed has little impact on fund investors, pointing out that J O Hambro is owned by an Australian parent and it has little impact on those investing in its funds. “There’s lots of ownership structures that support lots of funds.”

“Henderson is a well-structured, well put together team, they’ve always been internationally focussed and Janus is a predominantly US shop. If it’s a merger of equivalents and equals it makes perfect sense in that regard.

“No European manager has ever really cracked the US. A quick and easy way of doing it is just to come together.”

It wouldn’t change anything for fund managers as long as remuneration structures “work for them”, Toogood says.

Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor says the merger is “significant” for the active fund manager market.

In the current low interest rate environment, we have already seen investors move towards passive funds in an effort to reduce their overall costs. This move has increased pressure on active managers to provide clear evidence of their value.”

O’Keefe says consolidation could help convince investors of their relative value.

Chelsea Financial Services managing director Darius McDermott says it is a positive development for UK investors. “What we should gain from the merged companies is even more choice: Janus are particularly good in Japanese and US equities, which are gaps in the Henderson range.”