What's going on?

Two big money management firms, London-based Henderson Group and US-based Janus Capital, agreed to join forces on Monday. The combined firm will be worth about $6 billion and it will manage over $300 billion of investors� money.

What does this mean?

It�s an all-share merger, which means that neither companies� investors will receive cash but instead will get shares in the combined company. It�s being called a �merger of equals,� but in reality Henderson shareholders will own 57% of the new company (i.e. Henderson is being valued a little higher than Janus).

Why should I care?

The bigger picture: �Active� investment management is a tough business right now (tweet this).
Both Henderson and Janus are �active� managers of money, which means that they try to outperform the market average by doing a better job of picking stocks and/or bonds in which to invest. That business model has been threatened by the emergence of �passive� investment funds that typically simply track the average market return – and usually charge their investors a much lower fee. Many �active� managers have found it difficult to outperform the average market, which has left some investors wondering why they are paying them a higher fee. The result? There�s a lot of pressure on investment managers to lower their fees which, of course, hurts their revenue.


For markets: Investors think joining together makes sense.
One of the ways to counter difficult industry dynamics is for companies to merge with one another: that allows them to decrease costs (e.g. have only one head office) and maximize their revenue potential (e.g. sell their funds in different geographies). This makes particular sense for Henderson and Janus: the former is more of a European specialist while the latter�s footprint is mainly in the US. Both Henderson�s and Janus� stock prices jumped more than 10% on Monday – which suggests investors are happy with the strategic rationale of the deal.