In 2017, Denver-based Janus Capital and London-based Henderson Group merged to create a mega asset manager. Things did not go swimmingly in the years that followed.
When Janus Henderson Investors finally reported early this year that more investors were giving it money than withdrawing it — the first quarter that happened since the merger was completed — Financial Times editor Robin Wigglesworth wrote in a column titled “Janus Henderson inflows! INFLOWS!!!” that someone at the firm had “clearly made some kind of human sacrifice.”
Of course, Ali Dibadj, the new CEO of Janus Henderson, read the column.
“Look, honestly, I read this stuff, I chuckle, I move on. I just know that things, over time, will prove themselves out and you're seeing clear indications of that,” Dibadj said with a genuine smile.
An organic growth streak never started. Janus Henderson, which has $322.1 billion in assets under management, reported $500 million in net outflows during the second quarter. (The firm is well off its 2021 record $432.3 billion AUM due primarily to falling markets.) Year-to-date, Janus Henderson shares are up 11 percent, which beats the S&P Composite 1500 Asset Management and Custody Banks index return of 5 percent. The S&P 500 has returned 13 percent this year.
Activist investor Trian Partners, which owned approximately 19.2 percent of Janus Henderson as of November last year, also has two board seats and is eager for a turnaround.
“Given the industry pressure for scale and Trian’s interest in Janus Henderson, the specter of another potentially disruptive merger looms over the firm. That’s a headwind for organic growth,” said Eric Schultz, an equity strategies analyst at Morningstar. “The flip to quarterly net inflows in 1Q23 (for the first time since the 2017 merger) was a positive development and could indicate that Ali’s increased support for the institutional business is overcoming that headwind. However, it’s a single data point and his initiatives are still in the early innings.”
Personnel have turned over, too. Roughly half the 36-person central analyst team has departed since the merger, including four departures in 2023’s first quarter, according to Schultz. Qualified colleagues filled their shoes and maintained the company’s depth and experience, but frequent changes are nonetheless a “headwind to gaining long-term conviction,” Schultz added.
Dibadj acknowledges there is a long road ahead.
“We're not out of the woods yet. None of this is going to be linear,” Dibadj told Institutional Investor. But some major changes have already taken place or are underway. “The pace of disruption is extraordinarily slower today than it was 18 months ago. And that will continue to be the case if I do my job well.”
The new executive, who was previously the chief financial officer and head of strategy at AllianceBernstein, said that top-down mandates are not his style. When Dibadj joined Janus Henderson, he gathered 40 people together from across the firm: employees from all over the world, with various backgrounds, tenures, and jobs. The firm could not be all things to all clients, so he asked his colleagues what clients were going to want in the future and what the asset managers needed to deliver that it wasn’t already.
Out of the meetings with that group and others also emerged Janus Henderson’s priorities going forward: “protecting and growing our core businesses, amplifying our strengths, and diversifying where clients give us the right.” Those aren’t novel corporate goals, but Dibadj says how Janus Henderson plans to achieve them stands out, or at least shows progress that can change its trajectory.
The company is rethinking and investing in its sales infrastructure and people. For example, the firm hired Michael Schweitzer to lead retail distribution in North America, a strength of the firm that it wants to preserve and grow. Schweitzer, a veteran with nearly 30 years of experience, held a similar role at Capital Group, a competitor that has significantly outgrown other asset managers (its actively managed bond funds have attracted $100 billion over five years, twice the total of any other peer).
“Amplifying its strengths” essentially means doing a better job telling everyone about the good stuff Janus Henderson is doing.
Fortunately for the asset manager, higher interest rates and a new market regime have caused investors to reevaluate and adjust their portfolio allocations. “Fixed income used to be an uninteresting segment because there was no yield. Well now there is yield, and guess what? We're getting a lot of looks there,” Dibadj said.
“And I would argue that active management has historically been somewhat uninteresting to people because picking stocks didn't drive alpha because the market was just going up. And that's what we do all day at Janus Henderson,” he added.
Other parts of the company haven’t been commercialized enough. Shrouded within the firm is a biotech hedge fund that has performed far better than bigger peers, according to Dibadj. A 26-year-old multi-strategy business inside the firm has also performed well but wasn’t growing. “It was kind of middling away. No one had the guts to kill it, but no one had the guts to do anything with it either. This performance is great, and gosh, it's got almost a 30-year track record. Why don't we go do something with this?” Dibadj said.
Now, Janus Henderson — Dibadj included — is paying more attention to and showcasing well-performing strategies and getting prospective investors excited about them, too.
Asset managers have abandoned the term cross-selling but not the practice. A primary reason they have positioned themselves as portfolio problem solvers is to create organic opportunities to recommend more of their products and services.
“The good news is we have great relationships with clients,” Dibadj said. “We can get more wallet share, no question. And we should be getting more if you look at our performance versus our peers and other people's wallet share.”
If Janus Henderson is missing something clients are interested in, it’s acquiring and hiring. It hired an emerging market debt team last year and bolstered other private and alternative investment offerings.
Dibadj is also asking colleagues not just to think of the institutions and financial advisors it is mostly working directly with, but with the “client’s client.”
“I was just with a sovereign wealth fund the other day, a very large one, and we were talking about their citizens, what their citizens need. The client has to serve their client and the ultimate client has needs. If we can help them deliver on those needs, that makes us a better partner, that makes us a better asset manager, that makes us deliver on our purpose,” Dibadj said. “I'll argue that is differentiated than any other asset manager I've talked to or been at or worked with.”
Janus Henderson’s 2,000 employees are thinking more about that ultimate purpose which, according to its CEO, is improving the lives of pensioners, university students, or whoever. If that’s a north star, and the firm sticks to its new strategy, the business will grow.
“We're not there yet. It's not a consensus view that it's an exciting time,” Dibadj said. But in his opinion, there is no doubt. “It is an exciting time. I'm not promising linearity, but I'm promising progress. I think it's an exciting time and I think we're doing it a little bit differently.”
