This week ASX-listed international equities manager Henderson Group completed its merger with U.S. based multi-asset manager Janus Group to form the Janus Henderson Group with a primary listing on the NYSE.
However, ASX investors will also be able to buy Chess Depositary Instruments (CDIs) in the business under the ticker Janus Henderson (ASX: JHG) from June 5 in an outcome that offers ASX investors a rare investment opportunity as a high-quality asset manager focused away from the soft local economy.
The combined group will also have serious scale due to its US$330 billion in assets under management, with a market value around A$8.5 billion. Its leverage to the growth of the economies in Europe, the UK and US should also attract investors given the days of virtual zero interest rate policy (ZIRP) look over as real-deal GDP growth returns to the US and UK in particular.
The Janus Henderson Group (JHG) is rare then in potentially ticking the growth, income, value, and outlook boxes in the financial services space for ASX investors, alongside Macquarie Group Ltd (ASX: MQG) and Magellan Financial Group Ltd (ASX: MFG).
Outlook
The JHG ASX scrip trades on a deferred settlement basis and has followed the US scrip more than 6% higher in trade today as investors buy into the combined group's prospects to cut costs with estimated 'annual run rate pre-tax net cost synergies of at least US$110 million'.
The combined group's main overhead is its 2,000 employees around the world and some of the cost savings will probably be made by cutting back on non fee-earning shared services staff in IT, performance reporting, client services, HR, risk, compliance, settlements, reconciliations, corporate actions, and other common middle or back office functions.
Asset managers are also scalable businesses in that they have to take on minimal extra costs across the fee-earning investment or sales staff as funds under management (FUM) grow either via asset price appreciation, inflows, or hopefully both.
Growing FUM equals fast-growing fees and profits if costs are controlled or reduced as a proportion of revenue thanks to the operating leverage of these businesses and as such Janus Henderson Group represents a potentially attractive investment prospect.
The group can also be expected to pay a healthy dividend in U.S. dollars and is on my watch list for further investigation as an investment prospect given Henderson is one of the better UK fund managers and Janus Capital Group has scale advantages and a strong track record.
For now I still prefer Magellan as an investment opportunity given its advantages in terms of cost and operational control, although all three of the aforementioned businesses are among the very best financials on the ASX.
