Low growth, a squeeze on fees and sweeping regulatory change are set to drive further consolidation among asset management incumbents in the U.K and beyond after Monday's $6 billion merger agreement between Henderson Group (HNDGF) and Janus Capital. (JNS)
And analysts say that the ongoing depreciation of the pound and an attractive corporation tax regime in the U.K. could also mean an increase in cross-border deals where the merged entity sets up shop in London, as the future Janus Henderson Global Investors plans to do.
The partners' merger will create a fund manager with $320 billion of assets under management. On announcing the deal on Monday they both pointed to the need for scale and diversification in order to cope with pressures on fee income as key drivers behind the merger.
"Yesterday's deal is absolutely not a flash in the pan. The asset management industry faces increasing regulation, ongoing fee pressures and a myriad of other challenges. Brand and scale is all important. We should expect to see a continuation of this trend," said Liberum Capital analyst Justin Bates.
London-headquartered firms Rathbone Brothers, Schroders and Ashmore Group have the resources to strike deals. Meanwhile Permira, through its portfolio company the Tilney Bestinvest, throws a wild card into the mix following a series of acquisitions in the sector during recent years.
Pressures on asset managers are increasing. Passive investment managers have eaten away at the share of the market held by active managers like Henderson and Janus in recent years, with offers to match benchmark performance in return for annual fees that can be less than half those charged by active managers.