Merger creates funds giant

The growth of passive investing is putting fund managers under pressure to find new ways to cut costs, says Ben Judge.

The growth of passive investing is putting fund managers underpressure to find new ways to cut costs.

"In fund management, big is beautiful," says Jim Armitage in the Evening Standard. Hence the news that Anglo-Australian fund manager Henderson will merge with US peer Janus to create a new group with $320bn in assets under management. Henderson will de-list from the London Stock Exchange, but Janus will move its headquarters from Denver to London. Both firms' chief executives, Andrew Formica and Richard Weil, will stay on, as co-CEOs.

There's a "clear rationale" behind the tie up, says the Lex column in the Financial Times. With active fund managers losing business to passive index trackers, cost savings are imperative for those active managers still in the game. Being bigger will do nothing to help you beat the market, says Bloomberg's Matt Levine, but at least "you can save on administrative expenses and get more distribution and generally drive your costs down so you can compete with passive management on price".

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On this score, the benefits of the merger are clear, says Marion Dakers in The Daily Telegraph, with the combined firm "slashing $110m from their expenses in the first year after the deal", equivalent to 7% of their total costs.

Overall, it's a "pretty smart" deal, with "more to like than dislike", agrees Chris Hughes on Bloomberg Gadfly. Two questions keep fund managers awake at night, says Hughes: "how do I find new funds to sell to my existing clients? And how do I sell my existing funds to new clients?" The usual answer is to "hire stars, such as Bill Gross, blow money seeding aspiring new fund managers", and "build sales teams in foreign markets". This is "slow, expensive and risky", but the tie up between the two companies neatly addresses these "nightmares".

There's little overlap between their businesses, which is helpful for expanding the combined firm's reach: "almost 80% of Janus's customers are American, while 70% of Henderson's are European", says Paul Davies in The Wall Street Journal.

The loss of Henderson's London listing is a "sad aspect" of the merger and "a blow for the reputation of London as a financial powerhouse", says Patrick Hosking in The Times. However, "60% of Henderson's shares are still held in Australia and, since three listings would be silly, London was the obvious one to drop", says Nils Pratley in The Guardian. What is really important is "the location of the head office", and London is "a natural home for an asset manager running operations in the US, Europe and Asia".

The biggest flaw is "the decision to run with two chief executives", says Pratley. This is "a notoriously tricky arrangement". Indeed, says Hughes. "Weil and Formica need to agree that one will take over before long, and say so."

Bids and deals: LVMH bags luxury luggage firm

Rimowa is famous for its ribbed aluminium suitcases, which have become "a must-have for many of the world's celebrity jet-set crowd", says Adam Thomson in the Financial Times. The two are a good fit, says Stephen Wilmot in The Wall Street Journal. From Rimowa's point of view, CEO Dieter Morszeck, grandson of the firm's founder, is 63 and "needs a succession plan". Meanwhile, LVMH gets "a fast-growing complement to its stagnating fashion and leather goods division" at a "very reasonable" price.

Part of the reason the price is so reasonable is that it is "a deal between families, not financiers", says Wilmot. Morszeck stressed his "close ties" with the Arnault family, who control LVMH, and has publicly stated his desire to guarantee a "promising future to all Rimowa employees". "Common values, not crystallising value, seem to have driven his thinking," says Wilmot.

Ben Judge

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website,, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. 

As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.