Global wealth giant eyes expansion in Australia

The Australian funds management industry is in a consolidation phase, and now global group Janus Henderson has flagged that it’s keen to expand its footprint here.

Lucas Klein, Janus Henderson Investors’ head of equities Asia Pacific, Europe, Middle East and Africa, was in Australia meeting staff and clients this week, and said a strategic priority for the group was to grow in the Asia Pacific region, both organically and through acquisition.

“The focus is on where clients want capabilities that we don’t currently have. We’ve got a fantastic Asia equities capability that doesn’t serve as many clients as it should.”

Lucas Klein, Asia Pacific and EMEA head of equities at Janus Henderson Investors.Credit: Rhett Wyman

In 2016, the London-based Henderson group merged with American money manager Janus Capital in a share deal valued around $US6 billion ($8.9 billion). It created a group that currently has $541 billion in funds under management. However, only 10 per cent of that money is managed for clients in the Asia Pacific region, which is why Klein sees enormous potential for growth. “We’d love the opportunity to do more in Asia.”

In July, Janus Henderson won a $285 million emerging markets equities mandate from MLC Asset Management, and has also broadened its offering to clients in Australia to include exchange-traded funds.

The 2016 Janus Henderson merger was struck amid pressure on active asset managers globally to develop new distribution networks, offer greater product depth, while battling costs, and also demands from clients to have fewer partners.

Active asset managers have faced intense fee competition from low-cost passive fund managers and exchange-traded funds.

All those pressures remain today on active managers and have been drivers behind the consolidation in the Australian funds management sector.

Last year, Perpetual completed its takeover of Pendal, while Phil King’s Regal Partners has undertaken a handful of deals that have included acquiring Paul Moore’s PM Capital, private credit group Merricks Capital, and stakes in Taurus Funds Management and agricultural private investment manager, Argyle Group.

In recent years, other deals have included global asset manager Natixis taking a majority stake in top Australian equity manager Investors Mutual, and Charter Hall Group acquiring a 50 per cent interest investment in Paradice Investment Management.

Now Platinum Asset Management is in play after several years of poor performance forced its board and management to open its books to a number of interested parties, including Regal Partners and Wilson Asset Management.

Phil King, co-founder of Regal Partners, which has made a bid for Platinum Asset Management.Credit: Dion Georgopoulos

Meanwhile, Magellan Financial Group is in the middle of a turnaround after it too experienced a dramatic fall in performance and funds under management in the past few years. Magellan’s revival has been led by Andrew Formica, a former Janus Henderson co-chief executive, who was appointed to the Magellan board last July. Formica became its executive chairman last October.

Janus Henderson’s Klein said any possible acquisition in Australia or Asia would have to be the right cultural fit, and that it wouldn’t be “scale for scale’s sake”. In the past year, Janus Henderson has made acquisitions that include buying private credit manager Victory Park Capital, exchange-traded fund business Tabula Investment Management, and announced a partnership with Privacore Capital to offer alternative investment products.

Klein, who joined Janus Henderson about a year ago from Fidelity International, said the group believed there would be three themes driving equity markets in the medium to long term.

The first of those themes was geopolitical realignment. Klein said global trade tensions and wars would continue to reshape supply chains. He said the biggest beneficiaries of the deterioration in China and the US trade relations would be the economies of south-east Asian nations, India, Eastern Europe and Mexico as manufacturing facilities relocated there.

“We see the geopolitical environment as more turbulent than it has been in a long time. We think that’s likely to continue.”

In terms of China, he said recent announcements by the central government indicated they were serious about working to stimulate the economy.

He was also surprisingly relaxed about the result of the forthcoming US election. “There will clearly be sectors that will be winners or losers, depending on who’s elected, but we’re not panicked about the outcome of the election. No matter who the winner is, we think either candidate can be good for the US economy and good for markets.”

Even so, he said Janus Henderson saw better value in European and Japanese equity markets, and also the small to mid-cap stocks, compared with the US equity market, where the strong rally had been led by major technology companies.

Klein said the second theme was demographic shifts, where he highlighted climate change, working from home and ageing populations, as some areas Janus Henderson focused on. He said working from home had accelerated demand for related services from video conferencing, e-commerce to logistics, and decreased demand for office space and retail in central business district areas. The widespread ageing of populations was also lifting demand for healthcare and healthcare innovations.

The third theme was the return on capital. Klein expected that interest rates would remain high over the medium and longer term, putting pressure on businesses and how they deployed capital, which would shake out less well managed companies.

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