The recently announced merger between asset management firms Janus Capital Group Inc. and Henderson Group plc highlights the stresses facing the industry and may portend further consolidation, says Moody’s Investors Service in an issuer comment.
The merger represents a response to declining assets in active management, according to the New York City-based credit rating agency.
“The industry forces driving the deal are negative and the deal is largely defensive in nature,” Moody’s says. “Those forces include competitive pressures on management fees and substantial outflows from actively managed funds into passive vehicles such as exchange-traded funds.”
Outflows from actively managed domestic equity mutual funds have continued to accelerate this year, Moody’s notes.
“Strategically, the integration of two active asset managers, while positive, does little to address investor flight from active funds, and the corresponding reduction in asset management fees,” Moody’s says. “This merger highlights building stresses in the industry, even within the investment-grade space, and is likely the opening bell for more consolidation among the larger asset management firms.”
As for the Janus-Henderson deal, the transaction is credit positive for Janus, Moody’s says, as it doubles the company’s earnings base, diversifies its revenues, and provides economies of scale.