Advisers weigh pros and cons of Janus-Henderson merger

Expanded distribution, consolidation and some lower fees expected

Oct 3, 2016 @ 12:48 pm

By Jeff Benjamin

The announced merger between Janus Capital Group Inc. and London's Henderson Group is getting mostly good reviews from the industry, including the financial markets.

In mid-day trading Monday, the day the all-stock deal was announced, Janus (JNS) shares were up nearly 14% and Henderson (HGG) shares were up 16.5%, while the S&P 500 Index was down 41 basis points.

Pending shareholder and regulatory approval, the merger is expected to be completed during the second quarter of next year.

The new Janus Henderson Global Investors will be a $320 billion asset management firm with an estimated market capitalization of $6 billion.

David Haraway, principal at Substantial Financial, described Henderson's reputation as an “outstanding international global manager,” and said Janus is not as strong in the international sector.

“Combining the two and shedding some of the overhead in the process make sense, particularly for Janus shareholders,” he added.

According to one analysis of the combined asset management firms, they do represent an attractive geographical fit.

Janus has $116 billion in U.S. retail assets, which compares with $12 billion for Henderson. But Henderson has $66 billion in United Kingdom assets, compared with Janus' $3 billion in that market. Henderson has $28 billion in Europe and Latin America, where Janus has $7 billion. Janus has $16 billion in Japan, while Henderson has just $500 million.

Janus and Henderson AUM
Source: Janus, Henderson, and Bloomberg

“Although I'm generally pessimistic about mergers because of the lack of long-term economic value that they add for shareholders, this deal may help both of these firms,” said Kashif Ahmed, president of American Private Wealth.

“No one has heard of Henderson in the U.S. and while they are the bigger firm, this will get them a U.S. footprint,” he added. “I am also pessimistic about what this means for Janus, a firm I work with, because I respect its distance from Wall Street and independent, adviser-focused culture.”

In terms of the kinds of consolidation that typically follows a merger of described equals, Mr. Ahmed does not see a bright future for Janus CEO Richard Weil.

“Make no mistake, once the merger is complete, Dick Weil's desk will be in the men's room within 15 minutes,” Mr. Ahmed said. “There is no such thing as co-leaders. The people writing the check run the show.”

Representatives from Janus did not respond to a request for comment for this story.

Todd Rosenbluth, director of mutual fund and ETF research at S&P Global Market Intelligence, sees the merger as being about survival for the struggling active management space.

“In light of pressure from passive investments and ahead of the Department of Labor's new fiduciary standards that should encourage greater demand from passive, asset managers are likely to seek out partnerships,” he said. “Larger firms that grow through acquisitions can use scale benefits to bring costs down and launch new products. Janus has rolled out new thematic and small-cap focused ETFs and likely will offer more such products.”

Mr. Rosenbluth added that he believes there will be more consolidation among active managers in the months ahead.

“Whenever asset managers get together, they will look to see what overlapping offerings they have that can be combined,” he said. “It is reasonable to expect some fund mergers where the style is similar and one fund is struggling compared to peers. Investors in Janus funds will need to keep their eyes out once the deal closes."

Greg Carlson, senior analyst at Morningstar, said if lower fees are the ultimate goal, the expanded global distribution network could be the means to that end.

“There could be some collaboration in the investment teams, but I don't know how many products we would expect to see right off the bat,” he said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 02

Conference

Women Adviser Summit

The arjuna-design Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Integration can mean of different things to advisers. What does it mean to you? Marc Butler of Albridge Solutions explains how it is powering advisory practices.

Video Spotlight

Recommended Video

Channels

Latest news & opinion

Is ESG investing going mainstream?

Despite advisers' misgivings, asset managers are coming around to the idea that a company's stance on environmental, social and governance issues is a good proxy for future success.

Despite January's run-up in stocks, investors headed to bonds

More than $46 billion went to taxable bonds last month, versus $17 billion flowing into stock funds and ETFs.

Alternative funds suddenly look a whole lot better

The market sell-off highlights the virtues of hedging.

Olympics advice from financial advisers who are Olympians themselves

Meet some of the Olympians among U.S. financial advisers, and hear their words of wisdom for those vying for the gold in PyeongChang, South Korea.

Why the new tax law amounts to a 'stealth' tax increase

The government will use an inflation measure that causes things like marginal income tax rates to rise more slowly.

X

Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Last News

solo 401k calculator fidelity deduct social security tax tax implications of lending money to family harbor capital appreciation inv what is the 1099-r form 1099 error correction fsagx buy or sell vanguard gnma admiral shares t rowe 2040 hsa account chase average salary for cfp invesco fund performance western asset emerging markets debt fund difference between open ended and closed end mutual funds should i rollover my 401k to a roth ira converting roth ira to traditional ira american funds international growth and income bank of america merrill lynch number of employees vanguard short term tax exempt admiral ishares core s&p total us stock market jpmorgan chase pension plan for employees who can cosign for a loan t rowe price tax free income fund social security taxable calculator simple ira rollover to ira spdr barclays high yield bond etf recommended 401k allocation by age section 72 t of the internal revenue code ira minimum required distributions enrolling in medicare part a & part b h and r block filing fees most valuable collectible coins western asset global high income fund inc