The merger of Denver-based Janus Capital Group and London-based Henderson Group will create a global money management firm with more than $320 billion in combined assets, but for the new company to prosper, it will have to counter headwinds that are buffeting active managers, analysts say.
Both Janus CEO Richard Weil and Henderson CEO Andrew Formica — who will be co-CEOs of the new entity — announced the consolidation deal Oct. 3 in London, touting a new global distribution footprint that will give Janus, with $195 billion in assets under management as of June 30, greater access to the U.K. and European markets while giving Henderson, with £95 billion ($127 billion), June 30, greater reach in the U.S.
The all-stock deal is expected to close in the second quarter of 2017.
The resulting firm will be renamed Janus Henderson Global Investors PLC and will be based in London. But regardless of the newly combined company's reach, Janus and Henderson are active managers in an investment world that is embracing passive strategies.
“Increasingly, assets are going toward passive strategies,” said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence. “The challenge Janus, Henderson and other active managers have is to counter that.”
Mr. Formica said in a conference call and meeting with analysts that he and Mr. Weil were in strong agreement that active management can still flourish, ”if you've got a high quality product and investment team that does what it says, and, through the cycle adds value.”
Mr. Rosenbluth said he agrees that strong investment performance would be the best counter to passive headwinds, which have been strengthened by investors' appetite for lower-cost options. He noted that Janus also bought an ETF company in 2014, VS Holdings Inc., the parent company of VelocityShares LLC. Velocity Shares specializes in institutionally-focused exchange-traded funds, and, at the time of the deal, had raised $2 billion in assets. Velocity Shares data shows it had $3.7 billion in 17 funds as of Oct. 13.
Janus has struggled with inflows since the tech bubble burst.
The last time Janus reported a full year of net inflows was 2009, with company financial data showing net inflows of $900 million. From 2010 through 2015, the company saw a total of $62. 6 billion in net outflows, Janus data shows.
Outflows have slowed recently. In the first six months of 2016 through June 30, Janus reported $1.7 billion in net outflows.
Henderson Group has had stronger history of recent inflows, with $22.9 billion in net inflows between 2010 and 2015, shows Morningstar data, which includes mutual funds but not institutional separate accounts.
More recently the firm has struggled. In June, July and August of this year, Henderson reported $2.9 billion in net outflows, though it still had net inflows of $1.6 billion for the first eight months of 2016 through Aug. 31, according to Morningstar.
Investment teams and distribution personnel are not expected to be affected in a major way by the merger, analysts said.