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Janus to Merge With Henderson

How will this affect investors?

Morningstar, 10/04/2016

Janus' merger makes clear business sense, but it's unclear if or how it will benefit Janus' fundholders.

On Oct. 3, Janus Capital Group announced plans to merge with U.K.-based Henderson Group HGG. This deal is described as a merger of equals, with the joint company headed by co-CEOs Richard Weil (of Janus) and Andrew Formica (of Henderson). The combined asset-management firm will be called Janus Henderson Global Investors and have $322 billion of assets under management. The deal is expected to close in the second quarter of 2017.

The business rationale for the merger is clear: Both firms have been looking to diversify their product offerings and increase their distribution presence. While the deal brings both sides added distribution capabilities in previously untapped global markets, it's unclear whether that will be enough to curb the asset outflows that have plagued Janus in recent years. The combined company also expects economies of scale to help improve financial results.

The benefit to fundholders in the near term is less clear. If the merger helps ensure a financially strong investment house, investors may benefit from the firm's ability to attract, develop, and retain investment talent. Additionally, if added scale drives operational efficiencies, investors may be benefit from lower expense ratios. Whether investors will actually reap any gains from this merger remains to be seen.

From a cultural perspective, this deal does carry some risks. Enrique Chang, now Janus' head of investments, will become global CIO of the combined company. Since joining Janus in 2013, Chang has implemented several policies on the equity side that have brought stability and modest performance improvements. There is a risk that more changes may lead to manager and/or analyst turnover in the future. That said, some turnover may be beneficial--stronger managers and analysts from one firm may take over weaker-performing strategies managed by the other firm. There also could be cooperation: The goal is to have analysts of the combined company share the same investment philosophies and collaborate on investment opportunities, but it will likely take years of integration and trust-building before the two cultures are aligned.

Perkins Investment Management, which is owned by Janus, will continue operating independently as a subsidiary of the combined company. There are no expected changes to that investment team or process. 

We are monitoring parent-level developments, but the theses on individual Janus and Perkins funds remain intact, and their Morningstar Analyst Ratings therefore remain unchanged.

 

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