The £4.7bn merger between Janus Capital and Henderson Global Investors could “unsettle” fund managers but may yet prove to be beneficial for investors.
The merger between the two asset managers was announced earlier today, with the combined business expecting to generate annual cost savings of at least $110m (£85m). It will have around 2,300 employees based in 29 locations.
Hargreaves Lansdown head of investment research Mark Dampier says: “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.
He says: “[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.”
He notes 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 believes Brexit could also have impacted the companies’ decision not to list in the UK, but says where the combined group is listed has little impact on investors.
He says: “Henderson is a well-structured, well put together team, they’ve always been internationally focused 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.”
Chelsea Financial Services managing director Darius McDermott says it is a positive development for UK investors.
He says: “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.”